U.S. stocks registered their fourth straight-session advance as opinions began to swing in favor of the Federal Reserve’s decision to hike the discount rate.  Also, a growth in consumer prices, albeit uninspiring, reassured investors that the Fed would not raise rates for consumer and business loans anytime soon.

Market participants saw the Fed’s move as a sign of confidence in the U.S. economy and turned their attention towards domestic economic policy even as simmering debt issues in Greece and other European nations continued to give jitters. 
 
Surprising most traders and analysts, some central banks, including in China and Australia, have recently curtailed the flow of easy credit.  Policy makers have argued that too much liquidity could raise the prospects of inflation and thereby jeopardize the recovery.  One reason why the Fed moved to raise the discount rate could be the belief that banks are no longer in need of emergency measures.  Nonetheless, the Fed reiterated its stance that the more widely used fed funds rate, a benchmark for short-term interest rates, is expected to remain exceptionally low for an “extended period.”

On Friday, after a brief session in the red, the Dow Jones industrial average recovered to close up 9.45 points, or 0.1%, at 10,402.35, its highest close in a month.  The broader Standard & Poor’s 500 index edged up 2.42 points, or 0.2%, to 1,109.17, while the tech-heavy Nasdaq rose 2.16 points, or 0.1%, to 2,243.87.  On the New York Stock Exchange, advancing issues beat those that declined in price by a three-to-two margin.

Gains in equity prices last week were led by strength in financials and industrial shares.  The S&P500 rose 3.1% to 1109 for the week and the DJIA increased 3.0%, for a 303-point increase to 10402. The tech-heavy NASDAQ advanced 2.8% to close at 2244. 

This week sees a series of items that are likely to be of market-moving potential.  Although the flow of corporate earnings would start fading away, testimonies on the Hill, key reports of economic import, and a packed auction schedule of US Treasuries would keep traders focused.  Monday sees $8 billion in 30-year TIPS; Tuesday $44 billion in 2-years; Wednesday $42 billion in 5-years; and Thursday $32 billion in 7-years.

Fed-speak calendar is heavy this week, with such key speakers as Yellen, Bullard, Pianalto, Dudley, Kocherlakota, and Tarullo taking the podium.  Attention will remain on Fed Chairman Bernanke’s semi-annual testimony before the House Financial Services Committee (Wednesday) and the Senate Banking Committee (Thursday). Treasury Secretary Geithner testifies before the House Budget Committee on the proposed 2010 budget on Wednesday.

Retailers would be the cynosure of all eyes this week. Numbers are due from the likes of Home Depot (NYSE:HD), Gap (NYSE:GPS), Lowe’s (NYSE:LOW) Macy’s (NYSE:M), Nordstrom (NYSE:JWN), Safeway (NYSE:SA), Sears (NYSE:S), and Target (NYSE:TGT).

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