While it is not unheard of for stocks and bonds to both improve on the same days, the general relationship for the two asset classes is inverse.  On days stocks do well, bonds usually perform worse and visa versa.  The logic behind this relationship relates to both supply and demand (the more demand there is for stocks, the less demand there is for bonds and thus price competition causes those assets to adjust to match what sellers are requiring to attract their attention on that day) and also to market psychology (the news that generally causes stocks to improve is generally optimistic news that that makes the "safe haven" of bonds less attractive).  Yesterday and today though both stocks and bonds are improving.  Yesterday the driver behind stocks was enthusiasm that the global banking rules agreed to in Basel, Switzerland were not as bad as some had feared and also reports from China that industrial production in August grew at a double digit clip.  Today the driver for stocks was a better than expected August Retail Sales report.  Analysts had been expecting a .3% increase in Retails Sales and the actual number came in at 4%.  More impressive was the ex-Auto figure for Retail Sales with the more volatile auto component stripped out.  Analysts had been expecting a .3% increase and instead the increase was .6%.  In separate news July business inventories were up by 1% vs expectations of a .7% increase.  There are times when inventories increase due to a lack of demand.  That is not the case in the current economic climate where  most companies have significantly trimmed their inventories to conserve working capital.  Inventory increases are viewed by analysts as a sign of slowly improving business confidence by businesses that demand will increase and that they will need the inventory for future sales growth.  If one takes the July inventory build and the August Retail Sales figures together, it appears that the data points at least for this month are supporting a cautiously optimistic position.  So then the question arises as to why bonds are improving today also.  First, over the past two weeks there was a technical correction in the 10 Yr Treasury bonds that appears to have been overdone.  The yield on the 10 Yr climed almost .35% which brought the 10 Yr to a level that was more attractive to investors.  Second, there are many bond investors who believe that any optimism about the economy right now is misplaced and that things are worse than we all thing. Goldman Sachs appears to fall in that group.  This morning the Wall Street Journal is reporting that Goldman is expecting unemployment to move over 10% in 2011 and stay there for most of 2011.  Goldman is also projecting that the Federal Reserve could announce a US Treasury purchase program in November or December.  Whereas the last round of Fed Asset purchases was aimed primarily at driving mortgage rates lower, this round would focus on either driving US Treasury yields lower so that they were less attractive to banks who currently are purchasing them or simply just absorbing much of the supply of Treasury obligations so that banks are forced to find other uses for their money.  Currently, even at the very low levels of US Treasury yields, rather than lend money to individuals and businesses,  the perception is that banks are going  the easy money route by purchasing Treasury notes and earning money on the spread between the near 0% they are paying depositors and the 2.5% to 3.0% they can earn on a 10 Yr Treasury note.   Essentially today the market has two distinct opinions of the near term future of the economy.  The glass is either half full or half empty and it is a complete gamble as to which is correct.  If, however, we have another month of Retail Sales growth in the US combined, strong results in China and the lack of a crisis for European banks, then it will be increasingly difficult for those that are pessimistic about the economy to maintain that outlook.