Market Hangs On To Gains Awaiting FOMC

The market looked like it might give back some of yesterday's outsized gains after the open this morning, but so far it has been hanging in well. The Fed meets today at 2:15p ET and the fed funds futures are fully pricing in a 50 basis point cut in rates. That would take the target rate from 1.5% down to 1.00%.

There is continued talk that Japan could cut its interest rates further, to help stem the rise in the Yen. This helped spur the Japanese stock market +7.7% higher. Other Asian markets were mixed.

Also, China cut its interest rates overnight by 27 basis points. China is attempting to take several measures to support its ailing stock market, including private talks with insurers to persuade them to stop selling equities.

There were more solid earnings reports this morning, from companies like P&G, Kraft, and Kellogg. Even a few companies that reported disappointing earnings are seeing their stocks rise on the news, an indication that maybe stocks are fully washed out here and are pricing in most of the bad news that is already out there.

The dollar is lower again today, helping to boost commodities. Oil is up $3 to $66, and gold is up also. The 10-year yield is steady at 3.84%.

The VIX had a nice -16% drop yesterday, but is still high at 69.50. To me, this signals that any future gains won't come in a straight line. A high VIX means that more market volatility is likely, in both directions.

long VIX puts