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MARKETS HOLD ON TO RECORD HIGHS By WSS Research Team

By Carlos Guillen

It is simply incredible that equity markets have continued to climb to record highs for the past two trading sessions on very little economic data to support the strong bullish sentiment. Investors appear to be ready to jump into stocks on any bit of good economic indications, and this has served to lift the Dow Jones Industrial Average to its second consecutive record-high closing level this week, finishing yesterday's session at 15,105.12. More encouraging is that despite concerns that late entrants may increase volatility in equity markets, stocks are holding on pretty well.

Clearly helping to keep markets at record levels today was data that showed the number of people filing for unemployment benefits for the first time continued to decline, reaching the lowest level in over five years. According to the Department of Labor, initial claims during the week ended May 4 totaled 323,000, decreasing from the 327,000 revised figure reported for the prior week and landing below the Street's estimate of 336,000. The result continued below the 350,000 level, which economists say is consistent with moderate labor market growth of about 150,000 net new jobs a month, so after rather encouraging employment data recently, the hope for an improving jobs market is gaining momentum. The initial claims' four-week moving average was 336,750, decreasing from the prior week's average of 343,000, so it is becoming apparent that the down trend is still strong.

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Perhaps another item that is helping markets keep its gains is the general notion that central banks around the world are expected to continue executing their easy monetary policies, and today we say more evidence that these expectations are on the money. Over in Europe, the Bank of England decided to leave its key lending rate at a record low of 0.5 percent, where it has stood since March 2009. The central bank also left the size of its asset-purchase program unchanged at $582.90 billion. Both decisions were in line with economists' expectations.

Perhaps adding a bit of concern, but still not enough to take away stock gains today was news of a sharp rise in consumer prices in the world's second largest economy. China's April CPI rose 2.4 percent from a year earlier, topping economists' forecasts and increasing more than the 2.1 percent reported in March. The worry with ramping inflation is that it may serve to stop economic officials from continuing their easy monetary policy, which would mean less liquidity injected into the Chinese economy, which in turn would affect the rest of the world as well.

In all, equity markets at the moment are actually not only holding on to record levels but also attempting to make small gains. Oh! ... the Dow just reached a new all-time intraday high, simply amazing.

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