The battle between growth and inflation is starting to come to a head, as day-to-day volatility continues to increase and markets are trading range bound. The Fed did cut interest rates as expected, and many believe that the Fed will continue to cut rates in March. At this point, the Fed is expected to watch the business growth, unemployment, and the housing sector very closely to measure the health of the economy.

The retail sales numbers are expected to continue to come in softer than expected. This may be partially attributed to the extremely cold temperatures in much of the U.S., causing consumers to hibernate rather than shop. Also, inflation is becoming more and more of a concern in every household. The market will keep a close eye on the upcoming producer price index and consumer price index reports to further measure the Fed's next move.

The weaker trend for existing home sales and new home sales figures continues to prevail. The true test of the housing market will occur this spring, which is typically the prime time to buy a home. Many believe that the best time to put your house on the market is after the Super Bowl.

The weekly unemployment data is still cause for concern, with more individuals becoming jobless. The monthly unemployment report also came out weaker than expected, causing the stock market to see further declines. On the flipside, U.S. companies are considered to be some of the most efficient companies in the world. This was confirmed by the higher productivity that supported the market. In today's environment, it is possible that companies have less fat to trim than they used to, which could stabilize the bearishness of the employment situation more quickly.

When discussing the stock market, my views have really not changed since the last eView. The stock market continues to be extremely volatile, as a result of the financial tug of war. The hint of any sort of rate cut continues to be near-term supportive to stocks, because the market views ease-of-lending practices to be bullish for growth. I have also heard several comments lately that foreign investors view the stock market as a long-term buying opportunity, primarily due to the weaker U.S. dollar allowing foreign investors the luxury of increased purchasing power. In my opinion, the rate cuts may provide temporary relief to the economy-and most notably, the stock market. However, it is questionable as to how it will affect the market longer-term trend. Fed rate cuts are not indicative of a healthy economy. We are also uncertain if further credit crunch surprises exist.

Fed Watch: The market is mixed on the next move of the Fed. A number of analysts believe that the Fed should continue to lower the Fed funds rate by 50 basis points. On the flipside, many analysts are becoming more concerned with inflation. According to some recent speeches made by voting Fed members recently, another rate cut is not a guarantee.

Technical Update for March Ten-Year Notes:
Near-Term Trend: Sideways
Long-Term Trend: Higher
Support: 115-31.51; 113-28.5
Resistance: 117-27.0; 119-05.0
The longer-term trend is still pointing higher. The sideways action in the market is indicative of the sideways tug of war between growth and inflation.

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