Weekly Recap - Week ending 29-May-09The major averages finished higher on this holiday-shortened week -- S&P 500 +3.6%, Dow +2.7%, Nasdaq Comp +4.9%, Russell 2000 +5.0%. It was an extremely light week in terms of news flow and volume, with the biggest volatility due to gyrations in the bond market on Wednesday and Thursday.

Given the lack of news in the early going on Tuesday, investors looked to a much better-than-expected May Consumer Confidence reading of 54.9 (consensus 42.6) for guidance. It gave them more anecdotal evidence that economic conditions may be improving, and led to a 2.6% advance in the S&P.

The market looked to hold those gains on Wednesday, and did through morning and midday trade. But around 13:30ET bond yields began surging higher, which led to an aggressive sell-off in the stock market. The S&P ended down 1.9%.

The surge in yields occurred approximately 30 minutes after a successful 5-year notes offering. Though the auction itself was solid, mortgage origination sellers moved to hedge their positions and pressured the long-end of the yield curve. That sent the benchmark 10-year note more than one point lower, which pushed its yield above 3.70% to a fresh 2009 high. The higher borrowing costs associated with higher yields undermine the government's efforts to keep rates down in order to help along an economic recovery.

Treasury auctions remained on investors' minds on Thursday. After seeking direction in morning trade, the stock market managed to regain some of the prior day's declines after a successful 7-year notes offering that contained no surprises. The S&P ended 1.5% higher on the day.

There was some mixed economic data that morning worth mentioning. Durable Goods Orders came in at a better-than-expected 1.9% in April (consensus 0.5%), but that was offset by a downward revision in March to -2.1% from -0.8%. Initial Jobless Claims continued to show that the pace of layoffs is slowing, as their four-week moving average fell to 626,750 from 629,750, but Continuing Claims continued to indicate that the pace of hiring hasn't picked up, as they hit yet another record high of 6.788 million (consensus 6.750 million).

The major averages finished regaining Wednesday's losses today, including a spike in the final moments of trade to the highs of the session. The S&P advanced 1.4%. Otherwise it was listless trading on Friday, especially since the Preliminary reading for first quarter GDP had little impact, coming in at -5.7% vs. the -5.5% consensus estimate and the -6.1% Advanced reading.

One catalyst overhanging trade throughout the week was General Motors (GM), who completed several steps on its road to bankruptcy. After agreeing to a restructuring deal late Tuesday with the United Autoworkers, where the union would take a significantly smaller stake in the company and the U.S. government would take a significantly larger one (as much as 70%), the company disclosed on Wednesday that it would not consummate its exchange offers as the principal amounts of notes tendered were substantially less than the amount required.

However, the company's bondholders agreed to an amended deal on Thursday, which would allow GM to move forward with bankruptcy. Reports indicate the Obama administration plans to usher the company into bankruptcy on Monday (6/1).

Besides GM's upcoming deadline, expect news flow to be extremely light in the first week of June. But, as always, the first Friday of the month (6/5) will bring the highly-anticipated Nonfarm Payrolls figure and Unemployment rate.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	8277.32	8500.33	223.01	2.7	-3.1
Nasdaq	1692.01	1774.33	82.32	4.9	12.5
S&P 500	887.00	919.14	32.14	3.6	1.8
Russell 2000	477.62	501.58	23.96	5.0	0.4