JUNE 7, 2005

We are up 10 S&P points from my last post 5/26, all of it coming today. The last surge up came from China bashing and the beneficial effects a revaluation would have. Today's rally comes from Greenspan's comments, that bond yields will stay low and a flat yield curve may not mean economic weakness the way it has in the past. Recent evicdence of economic weakness is being taken in stride, as the pause that refreshes. It is ascribed to an inventory correction largely attributable to the auto sector, that is now being worked off with better things to come in the second half. Friday's weak employment report is a distant memory. If final demand continues to hold up, then all the above is true. Long rates might get low enough to inspire another round of mortgage refinancings which would bolster the demand side. It's a light week for data and so a good week for a market rally. Although the market ignored it, Greenspan did say the bond market could be signaling economic weakness. So when the data flow resumes the sledding will get tougher if it follows the lead of the payroll numbers.