The S&P 500 extended its gain to 2.2%. Even with that, this should be the sixth straight week of declines. This only underlines how far this rebound could go.
But what could limit it is the bond market. US 10-year yields rose to 3.20% after the CPI report before falling as low as 2.80% yesterday. This reflected a retracement and flight to safety.
But the lower yields do not persist. We are up 11 basis points to 2.92%.
What is the limit before high yields feed back into equity risk aversion?
This push-and-pull has led to the constant deterioration of stocks.
In FX, there is room for a continued retracement of the US Dollar. This is most evident in commodity currencies at the moment, but cable has also proven to be very risk sensitive, so this is a place to watch as well.