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More Good News: Interest Rates, Investing Risk and Economic Indicators

The Monday news that the S&P 500 Index had rallied enough to show a gain for the year was certainly a welcome sign. But there's some additional good news you should know about. Consider the following.

Risk premiums on debt securities are getting smaller, thanks largely to the government's Term Asset-Backed Securities Loan Facility. The Wall Street Journal reported that JP Morgan did a $5 billion deal on Monday that was 0.2 percent better than a Citigroup deal done in March. This is good news for you, as companies that can sell bonds at lower rates can, in turn, offer lower rates on the securities backing these loans, such as credit cards or auto loans.

The Wall Street Journal also reported that mutual funds have attracted inflows for the seventh straight week, or about $63 billion during this span. Also, money-market funds saw their asset fall for the fourth consecutive week. Consider that earlier this year, weekly outflows from stock funds reached $10 billion. This is a promising reversal, as it tells me investors are regaining their appetites for risk.

Two good signs about the American economy were released yesterday as well. The U.S. saw jobless claims drop to the lowest level since early January. Also, U.S. worker productivity rose for the first quarter of the year. These types of events help show why last month's 9.6 percent gain in the S&P 500 Index was its best monthly showing since March 2000 (9.8 percent), and second best since December 1991 (11.4 percent). The stock market is forward looking, and it is sending signals that the economy may be near its turning point.

That doesn't mean all news will be good from here on out. For example, we may still see increases in unemployment and in bank credit losses, which are related to the unemployment rate. The key is to not let these data releases cause you to abandon your investment plan.

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