Today, however, the bond market was strong, with the yield on the closely-watched 30 year treasury dropping to 6 point 06 percent. Marketplace's Jessica Smith has more. Prices dropped sharply and bond payout rose to their highest levels in a year. Some analysts say the reaction's been overdone, and if a rate increase is finally announced, the bond market might jump with relief that officials are taking measures to forestall inflation. David Horner is Senior Financial Strategist at Merrill Lynch.
Stock investors are concerned about earnings.
I would say rate increases are negative for the stock market even though the market may overlook the first one or two rate increases. The bond market will ultimately rally when the Fed increases interest rates, if the bond market feels the Fed has increased rates enough to prevent future inflation. So one follows inflation as its guide, and the other follows earnings as its guide. And I don't think that's where we are now. It's what a rate hike and other indicators like Friday's unemployment report say about the economy and the threat of inflation.