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If you watched any financial news or commentary at all this week you could not have missed the attention given to whether or not the Fed would continue to use the phrasing “considerable period” in their prepared comments.  The words have appeared in their remarks for several months conveying to the financial world that they were prepared to keep interest rates low for an indefinite period to sustain a less-than-robust economic recovery.  The phrase was dropped on Wednesday and replaced with the words can “be patient” before raising rates. 

This holiday-shortened week has been a busy one for corporate earnings reports and management comments.  The World Economic Forum inDavos,Switzerlandhas also been a major focus of investors.  Almost without exception the numbers have been exceptionally positive, but the ever-present cautionary tone kept market enthusiasm in check.

Earnings and economic reports are coming in more consistently than was the case several weeks ago.  The recovery looks to be sustainable with some noticeable trends taking shape.

This week stocks investors started the year with conviction as the NASDAQ reached a 2 ½ year high yesterday and a few companies saw their stocks rise more this week than all of last year.  Early selling this morning gave way to buying as investors were cheered by the announcement by TomRidge

Amidst the continuing threats of terror attacks, the War inIraq, the erosion of trust of corporate chieftains and mutual fund managers, the dollar’s continuing decline, and a host of other worries, the S&P 500 index managed the broadest advance in 23 years.  Over 90% of S&P 500 stocks rallied during the year, according to Bloomberg.  The S&P and the Dow Jones Industrials were each up over 28%, including dividends, while the technology and biotech-heavy NASDAQ was up over 50%. 

Good news on jobs, leading economic indicators, and comments from the Philadelphia Federal Reserve sent stocks soaring on Thursday.  So far this year the Dow and S&P are up roughly 24% while the NASDAQ is up 46%.  Stocks are poised to have their first up year since 1999. 

For the first part of the week market prognosticators were absorbed with the question of whether or not the Fed would remove the words “for a considerable period” from their comments indicating how long they might sustain short-term interest rates at these historic levels.  They did not.  Market watchers for the last part of the week have been focused on whether or not the Dow Jones Industrial Index would reach 10,000.   It did.

This week we saw improvement on the government policy front.  Yesterday, President Bush announced an end to the steel tariffs that have caused such noise from Europe andChina, as he announced that they had served their purpose.  Generally any government policy that restricts free trade is bad, but when concerted foreign competitive practices cause whole-industry disruption in a target country and the jobs it provides, action may be warranted.  But the questions are always complicated and heavily influenced by bias.

The market continues its sideways movement as the numbers from business and government continue adding to the case that the recovery is real and sustainable.  But everyone, from individual investors to institutional giants, from small businesses to mega-corporations, from the Federal Reserve to the Administration, remains cautious on the future of this economy.