Very early this morning the 10 yr note yield was up a basis point at 1.75%; but by 9:00 the 10 improved a little to unchanged at 1.74%. US stock indexes looking better at 9:00 with the DJIA pointing to a 35 point open at 9:30; 30 yr MBS price up 2 bp frm yesterday's close. U.S. stocks rallied yesterday as investors speculated first-quarter earnings would help equities rally. Income at S&P 500 companies probably fell 1.8% in the first three months of the year, the first year-over-year drop since 2009. At 9:30 the DJIA opened +25, NASDAQ +7, S&P +3; 10 yr note -1 bp at 1.73% and 30 yr MBSs +9 bps. The initial gains failed to hold, at 10:00 the key indexes all lower on the day.

Europe's stock markets are better today on a report that China's inflation eased a little after a 10 month high last month. The consumer price index increased 2.1% in March frm a year ago, the consensus estimate was an increase of 2.5% yr/yr.

There is only one scheduled report out today; Feb wholesale inventories at 10:00, estimates were for an increase of 0.5%, as released inventories were . It isn't much of a market mover, so no reaction to it. At 1:00 this afternoon Treasury will auction $32B of 3 yr notes.

Ben Bernanke spoke last evening in Georgia but there was little news in his comments. He said that economic conditions were far from where he would like them to be. Monetary stimulus in advanced economies "is providing additional support for other countries through stronger financial markets, more exports," he said in response to an audience question. Nothing in his remarks was noteworthy as far as markets are concerned. Tomorrow the minutes frm the March 21 FOMC meeting will be released wherein we may get a better sense of the members' ideas about future QEs and/or when the Fed will be thinking about withdrawing. Given the sluggish economic outlook, it is not likely the Fed will begin ending the QE for many months.

The NFIB Index of Small Business Optimism fell 1.3 points to 89.5, disappointing, but not a surprise given the current state of paralysis in Washington and the still mixed news on the economy. The Fed is lending the economy a trillion dollars, raising the value of its portfolio to unfathomable levels. In spite of assurances, the impact of creating nearly $2 trillion in reserves that can be loaned out is disconcerting at best, terrifying to some. The economy is hardly growing, but corporate profits are at record levels, an incongruity to most Main Street folk who see the Fortune 500 valuation hitting record highs while millions of small employers struggle to stay in business and tens of thousands have closed their doors, leaving commercial vacancy rates at elevated levels. Virtually no owners think the current period is a good time to expand. Over 75 percent think that business conditions in 6 months will be no better or worse than they currently are. Aggregated, there are no plans to create new jobs in the coming months, although some parts of the U.S. will experience job growth and some sectors will create new jobs (housing and energy in particular). But overall, it appears that there will be little growth coming from the small business half of the economy and as the world economy slows, maybe even less from big business.

Interest rate markets here and globally are declining as central banks pile huge sums of stimulus into economies. Japan's 10 yr note about 0.50%; Germany's 10 yr note 1.24% and here our 10 yr at 1.73%. Investors seeking safety in government bonds are likely to continue buying US treasuries with our yield better and still considered the safest in the world. Technically the only concern we have these days is that the momentum oscillators are at near term overbought levels; all other data remains bullish.

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