The market is relatively stable, as it has been over the past few days. This time, on mixed news. (Factory output increased to an unexpectedly high 0.9%; but first time unemployment claims also rose by 24,000.) The economic reports are coming out as favorable (which means, if the economy is beginning to get its footing, the Fed will begin to look at raising rates.) On the other hand, although the EU has, for the time being, stabilized the Greece concerns, there is some residual concern that this need to help nations also on the verge of debt problems, might spread to Spain and other EU nations. This news moves money to “flight to quality” which is perceived to flow to the US Treasuries. So, competing news items; both moving the market in a different way.
Technically, the market is also responding to a slightly “oversold” position, and the belief that many have had to cover “short positions” which is a required “buy” to square out the previous sale (or short sale, as the case truly is.)
On Fed news, Federal Reserve Bank of Dallas President Richard Fisher said “the U.S. government needs to create a plan to restore fiscal balance and reiterated that the central bank won’t monetize the debt.” This is the first thing in a long time with which I’ve agreed with Mr. Fisher.
In the end, the “elephant in the garden” issue to look for is inflation. Where the news breaks out to say that the economy is heating up, or that inflation is threatening to rise, look for an increase of rates. If major news breaks to this end, look to lock rates, as they’ll go on an upward trend for an extended period.
Meanwhile, conventional wisdom is still saying it will trace between 3.8%-4.0%.
