After completing their best quarter since 1998, the Dow and S&P hit their highest levels since June 2008 this week while the Russell 2000 hit a new all-time high. Friday's rally capped a remarkable week in which stocks climbed despite a number of negatives, evidence of traders' unquenchable appetite for risk.
In the accompanying video, I discuss the market's impressive performance with my Breakout colleagues Jeff Macke and Matt Nesto.
We also discuss the coming week, which includes a speech Monday by Fed chairman Ben Bernanke and minutes from the Fed's March 15 meeting on Tuesday. Always important, those events take on additional importance after conflicting comments this week from various Fed officials about the central bank's next policy steps. If the market really is being propped up by the Fed's easy money, then any signs of a tightening bias could threaten the rally…although that wasn't the case this week.
In case you missed it, here's an (incomplete) list of some major developments this week that — if the market were a rational beast — could have undone the rising trend.
* Setbacks for rebel forces in Libya and uncertainty about America's policy and "exit strategy," despite President Obama's first major speech on the issue. (See: Mission Accomplished? Obama Makes Case for Military Action in Libya)
* Rising radiation levels in the ground and seawater around the Fukushima Daiichi nuclear power plant as Japan faces continued challenges to contain the nuclear disaster and get its crippled economy back on its feet.
* U.S. Housing prices falling back to lows of the cycle, as measured by the Case-Shiller Index. (See: "Housing Is Dead": Bubble Still Bursting Here and Abroad, Says Harry Dent)
* Consumer confidence hit a four-month low amid rising inflation expectations, which were confirmed by a warning from Wal-Mart CEO Bill Simon.
* A brewing scandal at Warren Buffett's Berkshire Hathaway following David Sokol's sudden resignation amid revelations of his trades in Lubrizoil prior to Berkshire's bid for the chemical company earlier this month. (See: Did Buffett Blow It? The Sokol Story Doesn't Add Up)
* Inflation in the Eurozone hit its highest level since October 2008, putting pressure on the ECB to hike even amid renewed concerns about the sovereign debts of Portugal, Greece and Ireland.
* Crude prices hit a 30-month high, Treasury yields hit a 10-month high while copper prices fell amid concern about the outlook for the global economy.
Of course, there were some positives this week, including Friday's payroll report and another spate of mergers, including Nasdaq OMX's hostile offer for NYSE Euronext. Plus, the bottom line is the bottom line and, as Macke says, the trend is higher and professional traders are simply more fearful of missing the next rally vs. of being caught in another downturn… at least for the moment.