Bond Yields Reverse Lower, Stocks Rally

The core PPI came out in-line this morning, which is helping ease inflation worries. Tomorrow's CPI report will probably be a better indicator of near-term inflation trends. Nonetheless, this recent run-up in yields is more of a signal that the economic growth slump is likely behind us, and stronger economic growth lies ahead.

That is not a bad thing, and the stock market agrees. The yield curve has been inverted for quite some time, which pressures the financial complex. So a more positive slope to the yield curve is another welcome event, even if the move was a bit abrupt.

But today, for the 2nd day in a row, bond yields spike early and have reversed lower from there. If you looked at the 10-year yield chart like a stock, you would probably say it looks like it has topped.

Asian markets were up strongly overnight, with S. Korea spiking +2.7% and Hong Kong up +1.4%. Those are very solid gains, and the Yen continues to slide vs. the dollar, so the yen carry fears are not about to resurface right now.

Goldman Sachs (GS) beat estimates handily, but there is still some profit taking in the stock. The CFO said there is likely "more pain in the subprime market", and that we have not seen the bottom yet. But the bank index (BKX) is looking stronger, and I think is already looking past the subprime mess.

long GS