Is the Fed worried about the economy heating up?

Financials:  As of this writing (6:15 am) June Bonds are 3 higher at 151’08 and up 26 for the week, 10 Year Notes up 5 overnight at 132’06 up 10 over the last week, and 5 Year Notes 2.5 higher at 123’07 down 1 for the last week. Yields moved mostly lower with the 2year up 1 basis point at 0.16%, the 5 Year down 3 at 0.81%, the 10 Year down 5 at 1.61%, and e 30 Year Bond down 4 at 2.30%. Earlier this week CPI came out showing inflation at an annualized rate of 2.6% slightly higher than expectations. It seems the Fed is not worried that the economy is heating up and that their target for inflation remains near 2.0% and this bump above 2.5% remains transitory. This morning we have unemployment claims and Retail Sales at 7:30 am. I am looking to reinstate short positions in either Bonds or 10 Year Notes should the Bonds trade above the 158’oo level.

Grains:  May Corn is currently 5’0 higher at 599’0 having traded as high as 601’4 overnight. May Beans are 6’0 higher at 1416’0 up 6’0 for the week. Exports particularly Corn to China have pushed Corn just slightly above my 600′ O upside target. I am taking profits from long positions and standing aside. Beans are another story, I am still willing to be a buyer in May below 1390’0 in May and below 1190’0 in Nov. If you are long May look to take a short-term profit above 1422’0. We will switch to July next week.

Cattle:  June Live Cattle closed 87 lower yesterday and down522 for the week. May Feeder Cattle closed 190 lower at 145.22 down 735 over the last 5 sessions. I will be willing to reinstate long June LC positions below the 119.00 area. Support for May FC is the 14375 area. Next week I will be looking at the Aug. contract for Feeder Cattle.

Silver: May silver is currently 1 cent higher at 25.53 up 11 cents for the week. We once again tried the long side below 25.00 only to be stopped out as the market traded as low as 24.67 during the last 5 trading sees ions. To be honest I am not impressed with the current rally. Given the current Dollar weakness and the drop in treasury yields over the last 3 weeks, I would have expected more upside price movement. Treat as a trading affair between 24.80 and 26.10!

S&P:  June S&P’s are currently 16.50 higher at 4134.00 and up 50.00 since my last “Report”. It is once again earnings season. The banking sector should be showing record profits boosting the S&P to new highs. I remain on the sidelines.

Currencies:  As of this writing the June Euro is 5 lower overnight and 115 higher for the week at 1.1981, the yen 11 higher at 0.9196 up 51 for the week, the Pound up 5 at 1.3787 up41 for the week, and the June Dollar Index down 1 overnight at 91.66 down 75 points for the week. I continue to have a bullish bias on the Pound and the Yen and remain negative the Dollar Index from above 92.50.