Thursday, October 05, 2006


Maybe it is just one of those half-full, half-empty conumdrums. Maybe it is just some big money squeezing the balls off shorts and trying to get Mom&Pop into the market to sell to ("What has yet to come, and we're confident it will, is the irrational enthusiasm of the individual investor")

Whatever, the stock market is driving higher on the same Bernanke speech that has the bond market driving yields down. The stocks see Bernanke validating a resilient economy, the bonds see him underlining the economy's weakness. Go figure.

Anjali Cordeiro of DOW JONES NEWSWIRES is reporting on my Reuters service
Bernanke's comments "are the main driver right now," said Larry Peruzzi,
senior equity trader at Boston Company Asset Management. "Basically the concerns holding this market back have been growth concerns, and he was talking about the
resilience of the economy."

Stocks had been making robust gains even before Bernanke spoke. Most of the early gains came after data from the Institute for Supply Management showed that although the U.S. service sector turned in its weakest performance in three years in September, price pressures eased sharply.

Meanwhile, Danielle Reed and Deborah Lynn Blumberg of DOW JONES NEWSWIRES are reporting:
U.S. Treasury prices continued to move higher in early afternoon trading Wednesday, on the heels of comments from Federal Reserve Chairman Ben Bernanke underscoring that the housing market is weakening and after key service sector data came in lower than expected.
Following a prepared speech in Washington that didn't address the near-term state
of the economy, Bernanke noted in a question-and-answer session that the housing market is undergoing a "substantial correction," one factor in the cooling of the
The comments caused the bond market, already higher, to inch up just a little more.
Bernanke "supported the bull case on bonds" in describing the state of the housing market, said Tony Crescenzi, chief bond market strategist for Miller Tabak & Co. in New York, in an email comment shortly after the question-and-answer session.
Meanwhile, earlier in the day, the Institute for Supply Management non-manufacturing index for September came in lower than expected, at 52.9 versus August's 57.0. The price index dropped sharply to 56.7 from August's 72.4.
"We're getting more confirmation here that things are slowing down in the economy," said Carl Lantz, fixed-income strategist at Credit Suisse in New York, giving investors a "picture of an economy still in a soft landing mode.


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