Stocks Not Flying Now

Bonds ignored the hawkish talk (as usual), and rallied on the growth worries. The 30-year bond gained 9/16 to yield 4.69%, while the 10-year gained 3/8 to yield 4.55%, and the two-year note added 1/8 to yield 4.65%. Bond prices move inversely to yields.

Friday's release of the core personal consumption expenditures deflator within the government's report on November personal income will be telling for the bond market. Traders will be watching to see whether the Fed's favored measure of consumer inflation confirmed the flat November core CPI report, or whether it reveals that the higher-than-expected 1.3% rise in core producer prices was more on target. The core PCE is currently running at 2.4% year over year. Analysts expect a 0.1% increase for the month.

The Conference Board provided the lone piece of good news for the thinly traded markets Thursday. Its index of leading indicators rose 0.1% in November, meeting with consensus expectations. The report marked the index's third consecutive increase, suggesting that "economic growth has troughed," writes Peter Kretzmer, senior economist at Banc of America Securities.

Still, the index of leading indicators -- along with stronger-than-expected earnings from Nike (NKE Quote), ConAgra (CAG Quote), General Mills (GIS Quote) and (after the close) Research in Motion (RIMM Quote) -- was overshadowed Thursday by the Philly Fed and GDP data. But all this negativity was shown on very light trading volume as the Christmas holiday weekend nears. So, don't run and hide just yet.

And don't forget Philly is...well, Philly, where residents live on cheesesteaks and boo their home teams.