Tech Inflates on Benign Data

The markets and the economy are certainly in a sweet spot, but the risk remains that inflation could rear again. It is only because of high productivity that unit labor costs are lower. Otherwise, compensation is running at its highest level in six years, notes Michael Darda, chief economist at MKM Partners.

"Wage inflation could be a problem later in the year," says John Lonski, chief economist at Moody's Investors Service. Wednesday's data show that "there is still slack in the labor market," he says. If there weren't, companies would be complaining of scraping the bottom of the barrel for workers, and having to pay them higher wages for less or less-quality work.

The sweet spot is just fine for the stock market, which seem ever more bullish by the day.

"We're in this environment of inconsequential complacency," says Woody Dorsey, president of Market Semiotics, a research firm that specializes in behavioral economics. "The market can just push up and push up."

On Wednesday, the Dow Jones Industrial Average was pressured by weakness in Exxon Mobil(XOM Quote) as oil prices fell 2% to $57.73 per barrel. Alcoa(AA Quote) was likewise weaker Wednesday, down 2.1%. Overall, the Dow ended the day flat at 12,666.87 after trading above 12,700 intraday. The S&P 500 ended the day up 0.1% to close at 1450.02.