Markets closed Friday mixed on higher but below average volume near the lower ends of their respective ranges, On a bright note, utilities and food took hits as well as some other defensive groups while telecom and retail finished higher suggesting possible rotation.

The longer-term rate of inflation doubled in January to 1.3%, closing in on the Federal Reserve’s 2% target and potentially raising the odds of another interest-rate increase later this year. The core rate that excludes food and energy climbed a sharper 0.3%. Over the past 12 months the core rate has advanced 1.7%, the biggest year-over-year gain since the end of 2012.

Meanwhile, fourth quarter GDP was marked up slightly to 1% from 0.7%, but that was mainly due to larger stockpiling of inventories that could weigh on the economy in early 2016, thus this mark up was more of a mark down. Slower growth and higher inflation, should these measures worsen, equals stagflation.

Nevertheless, futures have bounced and are now trading slightly higher on news China's central bank will monetarily ease further by lowering the amount of deposits banks hold in reserve by 0.5 percentage point due to liquidity shortage concerns. This will free up about 700 billion yuan, or about $108 billion, in funds for banks to make loans, analysts estimate.

Keep in mind that government economic data should be taken with a grain of salt. The government has changed the way it calculates inflation scores of times over the past three decades, and many economists estimate that true inflation lies somewhere between 5% and 8%. In addition, if the government understates inflation, it then by definition overstates GDP growth such that current "growth" numbers might easily be contractions. This then gives them reason for further easing in their attempts to manipulate markets higher.

China's two big concerns are avoiding negative interest rates and potential currency wars. But liquidity concerns are at the forefront, thus forcing China's hand to ease further.

This naturally could prolong the current bounce, but the overall trend remains down.