Take comfort in global economic unrest?

Several unusual forces are pushing and tugging at markets, making it hard to isolate actual changes in trend.

There were no good clues in the economic data, neither signs of stall nor acceleration. New claims for unemployment insurance in April have been a hair higher than in March, near 450,000 weekly. New mortgage applications are running 31 percent above February, confirming a remarkable spike in home sales, but we won't know until mid-May how much is due to the expiring tax credit (bet on "a lot").

First-quarter U.S. gross domestic product pulled up 3.2 percent in today's release, the third straight quarterly gain, but the stock market is down on the news. Consumer spending was a healthy component, which it sure as hell ought to be, given the Treasury hosing $150 billion that it doesn't have into American pockets each month.

In one of the best measures of inflation, the GDP report had its annualized rate dropping from 1.5 percent in the fourth quarter to 1.1 percent. Low inflation is good; too low is not.

The all-defining 10-year T-note continues to fall in yield, a four-week straight-line decline from 3.99 percent to 3.66 percent this morning. 3.6 percent is the next key level, going all the way back to December. Maybe this drop reflects recovery skepticism among global bond investors, or maybe it's a temporary flight from woes in Europe.

Mortgages are stuck at 5.125 percent, the spread to the 10-year at 1.45 percent the widest in six months -- possibly widening because flights to quality are usually limited to Treasurys, or possibly because the Fed is no longer buying mortgage-backed securities and mortgages are gradually returning to a normal, 1.75 percent spread.

After its meeting this week, the Federal Reserve tilted its description of the economy ever-so-slightly better, but is obviously still worried, maintaining its "exceptionally low ... extended period" rate language.

Kansas City Fed President Tom Hoenig dissented again, his third-straight demand since January to toughen language; the Elmer Fudd of inflation-hunters, he's still blazing away at a "Wascawy Wabbit" now gone altogether.

Americans are properly preoccupied with our own affairs, the more so the closer we get to our front doors. Most of us feel the weight of employment and housing, and flinch at thinking about the fiscal-repair sacrifices ahead. ...CONTINUED

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