Bad or good news - it's all the same for equities
The Fed's Beige Book really did a job on stock prices this past week. The report indicated that the economy was still sluggish - depressing equity investors because they just don't see the light at the end of the tunnel any more. Stock prices recovered some of their losses on Friday's friendly inflation news, but it wasn't enough to get them back to last week's levels. All major indices are now below year- end levels.

Beige Book lifts bond prices
Bond investors were quite energized by the Beige Book report that showed continued weakness in the economy. It led them to believe that the Fed's easing cycle may not be over soon. It certainly reinforced the view that the Fed would likely reduce the federal funds rate target 25 basis points at the FOMC meeting on August 21. Treasury yields fell further on Friday with the news that the producer price index declined 0.9 percent. Even though the core PPI inched up during the month, the indexes at earlier stages of processing showed that there aren't inflationary pressures in the pipeline. While the yield on the 30-year bond only dipped 7 basis points from last Friday, yields fell more dramatically for shorter-term instruments.