Oil Trumps ISM Data, M&A Activity

The bond market, meanwhile, seems to believe that the bite of oil into growth and/or more Fed rate hikes will be enough to contain inflationary pressures. The benchmark 10-year bond rose 8/32 while its yield fell back to 4.08%. There was also news that June layoffs reached a 17-month high, according to Challenger Gray & Christmas.

St. Louis Fed President William Poole, who doesn't vote on rates this year but tends to be hawkish on interest rates, said he believes low bond yields reflect low inflation expectations. He also said the Fed has acted "in timely fashion" in moving rates higher.

That was enough for fresh buying into bonds, which have been on a downtrend since the Fed failed to provide a hint that it planned to end or even pause its year-old rate-tightening campaign last week.

While many market players still hope that such hints may be forthcoming when Fed Chairman Alan Greenspan gives his semiannual testimony to Congress on July 20, the strong economic reports recently and the employment report on Friday may dampen these hopes.

That would especially be true if beyond the headline payroll number there are indications of higher wage pressures, a nascent trend the Fed is no doubt watching closely.

To view Aaron Task's video take on today's market, click here.

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