Market Rebounds; Inflation Signs Obvious

Thursday began with a continuation of Wednesday's pull-back, with the Dow lower by nearly 50 points in the opening half hour. But, as has been the case for many a day that looked to be headed towards disaster, the market suddenly and without cause pivoted and moved higher, stabilized in the positive and closed with healthy gains.

Dow 12,552.96 +68.34; NASDAQ 2,480.32 +21.01; S&P 500 1,447.80 +8.93; NYSE Composite 9,477.76 +64.13

The general news was counter-trend, as new unemployment claims were sharply higher as was the price of crude.

Advancing issues outnumbered declining ones by nearly a 2-1 margin.

New Highs: 280; New Lows: 86. Despite the headline numbers from the indices, new highs remained muted, still signaling a continuation of the downtrend.

Oil shot skywards once again, up 1.84 to $63.85. Gold is getting close to a breakout position, adding another 5.60 to $685.30. Silver refused to follow along, losing 4 cents to $13.86. The move in gold may be somewhat of a reaction to increasingly alarming inflation news and Friday's PPI numbers could augur more increases in gold.

On the inflation front - the one the Fed promised to fight but hasn't - there's a lot of anecdotal evidence that food prices are going to spike wildly this Spring (if it ever arrives) and Summer. The key driver is corn, which is being more widely planted and grown for alternative energy use, primarily to be converted to ethanol.

The upshot is, so far, higher prices for corn and less arable land devoted to other crops, especially wheat, which some predict will cause a tightening supply and higher prices for the most staple of staples, bread.

Adding to the food woes, corn is used as a primary ingredient in farm animal feed, the price of which has nearly doubled in a year, so all meat products should see price increases over the next six months.

On top of that, as if that weren't enough, there's been widespread damage to orange groves in California and peach orchards in Georgia, and then there's the mysterious bee colony collapse disorder which is literally killing off millions of bees, important for pollination of all forms of fruits and vegetables.

If the Fed is looking for core core inflation, the two biggest components being food and energy, it's staring them straight in the face. Still, they refuse to do anything substantive - like raise interest rates - over fear that their glorious stock market might decline.

Sadly, the Fed cannot even read bold print, so expect inflation to remain untamed for some time.