Benign Inflation Data Pushes Bond Yields Lower

The market got some encouraging news this morning, both on the economic front as well as the continued 1Q earnings picture. Asian markets were mixed overnight, and our futures this morning were pointing to a weak open for stocks.

Coca-Cola (KO) and Johnson & Johnson (JNJ) both reported better than expected results before the open, which helped the market open a little stronger than the early futures were pointing to.

On the economic front, core CPI came in below expectations (+0.1% vs. +0.2%), which brought the year/year rate down to 2.5%. Also, capacity utilization fell to 81.4% (81.9% consensus). These helped ease inflation fears, and the 10-year yield is down 4 basis points to 4.69% as a result.

The market is shrugging off some of its early weakness. A strong housing starts figure is boosting that sector (+1.22%), followed by healthcare. Brokers and semis are lagging so far.

Looks like a pretty good setup. I don't think profit taking will be too severe. But there are lots more earnings reports after the bell tonight, so we need to stay on our toes.