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Today stocks and bonds both paused to think about yesterday’s huge rally.

In my opinion, stock investors and traders paused to think about whether they should bid stocks higher. The Standard & Poor’s 500 closed up 0.16% and the Dow Jones Industrial Average added 0.47%. The NASDAQ Composite and the NASDAQ 100 gained 0.0% and 0.03%, respectively. The small-cap Russell 2000 was higher by 0.16%.

Technical indicators pointed to further gains. Maybe. The S&P 500 cleared an important technical barrier by closing above 4500. But the index didn’t close very far above 4500–at 4502.88 on the day. That’s not exactly the kind of big break-through that sends a flood of new money chasing stocks.

The bond market paused to wonder if, maybe, yesterday’s huge drop in yields–by 19 basis points on the day to 4.45%–and the accompanying big increase in bond pries–might have been overdone. I was struck today by the number of Wall Street voices that I heard urging caution and saying that it was premature to say the Federal Reserve was done with interest rate increases. I certainly wasn’t hearing any commentary like that yesterday.

The yield on the 10-year Treasury was up 9 basis points to 4.54% today.

One thing I heard repeatedly today is caution that inflation really is back under control. You might note that the Fed’s target is still 2% and that core CPI inflation ran at a 4.0% annual percentage rate in October.

One thing that I didn’t hear but that I think about is a caution that interest rates are now being driven by the bond market and not the Federal Reserve. And that the big issue for the bond market is what yield will be needed to meet the huge demand for funding in the U.S. and overseas sovereign debt market and in the corporate debt market. To a large degree a stock market rally makes the bond market’s job tougher since it will need higher yields to compete for dollars (and euros and yen and yuan) against gains in stock prices.

I don’t think the bond market will return to the 5% yields visited briefly at the end of October until after the December Federal Reserve meeting and its update of the Dot Plot projections for inflation and interest rates in 2024.

But nothing really changed about the supply/demand balance (or imbalance) in the bond market yesterday. I expect to see 5% yields on the 10-year Treasury again although not in all likelihood until 2024.