Treading water
Perhaps we would be too greedy if we expected the stock indices to increase more than two weeks in a row. The economic indicators that were reported were generally not friendly for the equity market. Negative earnings warnings also made an appearance this past week.

Treasury prices tank on economic news
In the bond market, investors took the April retail sales and consumer sentiment figures at face value, believing that the end of the Fed's easing cycle is in sight. It is interesting that bond investors seemed to ignore the downward trend in retail sales and only focused on April figures - which by the way were boosted by higher gasoline prices. In addition to the economic data, Treasury investors are also hit by competition in the form of corporate supply. This week's Treasury auctions suffered due to the large number of corporate offerings that have come to market recently.

Perhaps it's good that bond investors have such a negative reading of the situation. Maybe that means they won't be disappointed next week with the Fed should they only reduce the federal funds rate target by 25 instead of 50 basis points.