CPI was the most watched data (there was also Empire St, business inventories) and they came in on-consensus, core +0.2%. The Street was set up for a strong number and shortcovering was rampant.
Greenspan, at his confirmation hearing in front of a Senate panel, says the general view is that inflationary pressures are "not likely to be a serious concern ahead". Therefore, he says policy is likely to be "measured," but clearly this is the Fed's general view, which is subject to error. If their assumptions are mistaken, they will act accordingly on policy, he said.
Buying was accelerated after Greenspan's comments were benign, The two fears on the Street, a strong CPI and a hawkish statement from Greenspan did not happen, and the relief rally was palpable.