Bernanke Calms Jittery Markets

On Feb. 16, the day after Bernanke's second day of testimony, housing starts were reported falling to their lowest level in 10 years. Also, the core consumer price index for the month of January ticked up, boosting the year-over-year inflation rate to 2.7% from 2.6%.

More recently, on Tuesday, the Commerce Department reported durable goods orders dropped 7.8% in January, after a 2.8% rise in December. This gauge of weak business spending was echoed by Wednesday morning's revision to fourth-quarter GDP.

Business investment was revised dramatically lower, to a 2.4% annualized drop from an initial 0.4% drop. The February Chicago PMI, a measure of economic activity in the region, also came in lower than expected Wednesday, at a reading of 47.9 vs. expectations for 50. More worrisome was the jump in prices paid to 63.2 from 54.9 in January.

"This cuts to the core of what worried some in the markets [Tuesday], the idea that business spending will weaken at a time when the consumer is not in the best of shape to carry the weight of the economy," he writes.

Also, investors have been plagued by increasing worries about the subprime mortgage market, where delinquencies have increased, risk premiums on related derivative securities have widened dramatically, and headlines about banks in trouble have multiplied.

Thursday brings more potential headwinds for the market -- the ISM manufacturing index and the core personal consumption expenditures index, the Fed's favorite inflation gauge. With such reports in the hopper, we'll see if this is the little bounce that could ... or couldn't.