"It's not the news that matters but how the market responds to the news," Aaron Task told "RealMoney" radio show listeners Friday, adding that the market was having "a very positive reaction to news that on the surface ... is very negative. Task was filling in for Jim Cramer. Intel ( INTC) warned that first-quarter sales would miss estimates, sending the stock lower intraday. But the tech complex and the Nasdaq shook off the news and moved higher. Moreover, the 10-year Treasury note slumped, sending the yield to its highest level since June 2004, due to inflation fears, the notion that the Federal Reserve will take rates as high as 5.5%, and evidence that interest rates worldwide could move higher. Task said that this should be weighing on the broader equity markets, or at least on "growthier" areas of the market. This is because in today's global market, financial players from around the world borrow money from one part of the world and invest in another part, a strategy known as the carry trade. Right now, Japan's key lending rate is at 0%, so you can get money for free there and then invest it in other places. This excess of liquidity has fueled rallies in commodities and small-caps, among other sectors. But the European Central bank said Thursday that it will take rates up a quarter-point and the CPI data that just came out in Japan has solidified expectations that rates will soon go up there as well. The prospect of less liquidity weighed on Treasuries, even if stocks managed to ignore the news, Task said.
Chris Edmonds, director of research at Pritchard Capital and RealMoney.com's energy guru, joined Task to discuss recent rockiness in energy markets. Edmonds said that in the short them there will be a fair amount of volatility, in part due to the fact that warm weather has weighed on natural gas prices.