US Manufacturing PMI Print Best Since April 2010, Inflation?

It use to be good news was bad news and bad news meant more QE and thus was good news. I think a lot of people are trying to figure out what is good and what is bad, but the new dynamic is not more QE, it is when the first rate hikes will hit. As I have recently tried to illustrate, rate hikes are not good for market activity, in fact they tend to usher in bear markets. One of the theories I have seeing recent inflation data (confirmed in today's PMI) is that no matter what the F_E_D promises, or what intensions they may have, their mandate is dual, maximum employment and stable inflation (target is 2%). The F_E_D has already surpassed the point in employment in which they said they'd start rate hikes and they have surpassed their inflation target with May's CPI print alone, inflation now running above the F_E_D's comfort zone on a multi-month trend, not quite the noise Yellen characterized it in the post F_O_M_C press conference.

Today's Manufacturing PMI print came in at the strongest since April 2010 with the strongest growth since May 2010, causing Market to comment that Q1 GDP's negative print may actually be a 3% print in the current quarter, not the best signal to the market that is concerned (at least smart money seems to be) that inflation will force the F_E_D's hand to hike rates and on a much earlier timetable, an unknown one as well as it's no longer F_E_D guidance, but as the F_E_D said, the data that guides decisions and the inflation monster is one they can't let get out of the box, actually forcing their hand to hike rates.

The market always front-runs what the F_E_D intends or the market thinks the F_E_D will do...


Here's the initial and subsequent reaction to the 9:45 PMI data release...

 DIA bounces initially at 9:45 to run in to another negative intraday divergence, no accumulation at the 9:45 lows.

 IWM also initially bounces in to another negative divergence this morning.

As does the QQQ

And the SPY.

Intraday breadth is not horrible as far as readings right now, but the trend from Friday has continued...

Down.

This is why I'm so interested in VIX and treasuries this week after the F_O_M_C, to see how the market is truly taking the F_O_M_C, but more importantly, how it's taking the inflation data, so far it doesn't seem to agree with Yellen that it is noise.