Small cap and blue chips
Stock prices were generally gaining this week, particularly among blue chips and small cap stocks. The Russell 2000 index managed to surpass its December 31, 2000 close today by a hair. Both the Dow Jones Industrials and the S&P 500 were generally climbing, albeit slowly, this past week, but the Nasdaq composite peaked on Tuesday and then fell back each of the next three days. Among the major indices, the Nasdaq is the only one that is down a tad from a week ago. Holidays will dampen volumes in the next week though activity may hop on December 31, the last day to consider purchases and sales that will have on impact on this year's income tax bill.

Treasury yields edge down again
Economic indicators only marginally influenced market players this week. Bond investors also focused on the problems in Argentina, the political haggling in Congress that ended up convening without an economic stimulus package, and generally illiquidity in the markets. Treasury yields generally inched down over the course of the week, until Friday when yields tilted higher again. In the end, yields were down marginally from last Friday's close.

The rising rate environment over the past month, despite the continued Fed easing, could be dampening economic prospects. Rising yields on the 10-year note are putting upward pressure on mortgage rates. Weekly data from Freddie Mac show that mortgage rates have generally picked up in the past four weeks. This could hamper housing activity during the recovery next year.