Bernanke Burns the Bulls

As the rest of the world reveled Monday in the rites of spring, the U.S. markets herked and jerked, weighing the Fed's commitment to vigilance on the back of more strong economic data -- and some backtracking by Ben Bernanke.

The dollar and U.S. Treasury bonds sold off through most of the day, while U.S. stocks and commodities began a spin up the maypole. But stocks turned violently lower on the words of CNBC's Maria Bartiromo, who said Bernanke, the Fed chairman, mentioned to her this weekend that he's unhappy with his growing reputation as a "dove."

The CNBC personality reported that the Fed chief said markets were "wrong" to react to his congressional testimony last Thursday as necessarily telegraphing a pause in June. She reported that Bernanke said it is "worrisome" that people don't see him as an "aggressive inflation fighter," and claimed that his comments had been designed to create flexibility -- not cement faith in the one-and-done scenario.

"I think the market is getting used to Mr. Bernanke in his new role," said Jack Malvey, chief global fixed-income strategist at Lehman Brothers.

The remarks, supported by subsequent comments by Chicago Fed President Michael Moskow, called back into question whether or not the Fed will take a breather after raising the fed funds rate in May 10, or hike again to 5.25%.

Indeed, the odds that the Fed will hike again in June jumped to about 42%, from 24% Friday, after the Bernanke headlines, according to Miller Tabak. The Dow Jones Industrial Average closed down 24 points, or 0.2%, at 11,343, while the S&P 500 fell 5 points, to 1305, and the Nasdaq Composite, which had struggled throughout the day dropped 18 points to 2304.

Bernanke might have had good reason to jump back into the fray. Signs that risk appetite is abating or that the economy is slowing are almost nonexistent, so the Fed's insistence that its policy is working or that inflation is "contained" is sounding stale. Most indicators are surpassing expectations, and predictions that the germs of a housing market slowdown would curb the U.S. consumer have been dashed at almost every juncture.