Cautious Floating

After a massive beating yesterday, the Stock market opened up to the downside again this morning, with the Dow down 100 points.  However, will this slide in stocks continue?  It doesn’t appear likely.  Although a continued drop is certainly possible, at this point, it doesn’t appear likely.

Mortgage Bonds were the beneficiary of money flowing out of the Stock market yesterday.  With the adverse relationship between stocks and bonds, the Stock market will likely damage the Bond market today if the Stock market rebounds.

PPI was reported at 0.55% for the month of March.  With the market expecting 0.1%, this is much higher than anticipated.  Inflation on the manufacturing level does not always translate into higher prices on the consumer level.  We will have to wait until CPI is released next week to determine if inflation is really taking hold.

Although the Bond market is up so far this morning, should stocks rebound and turn positive, it will likely come at the cost ofmortgage Bonds.  It is safe to assume that with the Stock market being at the bottom of a trend line, we are in a very cautious floating bias.  Should stocks turn positive however, we will quickly turn to a locking bias.