The bond and mortgage markets started a little better this morning after a bout of selling yesterday as the equity market bounced off very oversold technicals; the bond market equally extended, overbought as we note two days ago. This morning in early activity the stock indexes were weaker. Yesterday's minor price declines and the improvement in equity markets were not n any way fed by a change in the over-riding fundaments of an economy weakening, energy prices and commodity prices increasing.
This morning, in a week with hardly any economic data, May import prices were expected down 0.7% but increased 0.2%; export prices were +0.2% against forecasts of +0.3%. The increase in import prices bothered traders a little but there is no reason to fret over inflation since markets refuse to look at food and energy prices as inflationary regardless of how much they increase. Then there is Bernanke, he continues to use the word 'transitory' to define the increases in oil and food prices; in his vernacular 'transitory' could easily mean years.