Bernanke Unfairly Grilled Before Congress

This morning's post is a bit late because I haven't been able to take my eyes and ears off of this Congressional hearing with Fed Chair Bernanke. The real issue they're trying to get at is whether Bernanke and Paulson strong-armed BofA's Ken Lewis into acquiring Merrill Lynch.

I think these Congressmen are forgetting that we were in the midst of a total meltdown in the financial system, and I think Bernanke did a good job stabilizing the system. Hindsight is always 20/20, and I'm sure there are things that could have been handled better, but I don't think that warrants this public flogging.

And if were so easy to pressure a big bank into buying an investment firm, why couldn't the Fed have found a buyer for Lehman? They could have stemmed some of the meltdown in the financial markets last fall. Why doesn't anyone bring this up?

In other news, BBBY reported better-than-expected earnings last night, and their stock is higher. It is also helping boost retail stocks today, which are one of the leading groups. NKE also beat estimates, but disappoint future orders is hitting the stock this morning. In housing, LEN reported that cancellation rates are dropping, and that is providing a big boost to the homebuilding stocks (+3.8%).

In economic news, final Q1 GDP was revised slightly higher to -5.5%, from its previous -5.7%. But continuing jobless claims ticked higher to 6.74 million (from 6.71 million), which to me shows that this economy continues to need the stimulus, as opposed to the criticism of the Fed yesterday that they should have mentioned plans for the removal of the stimulus.

Asian markets rose overnight, with more reports of strong new lending in China; the dollar is higher today, but commodities are also higher; the 10-year yield is lower to 3.65%; and the VIX is falling -5.75% to the low level of 27.38.

Trading comment: If the market is about to embark on an imminent decline, like the bears would have you believe, it sure isn't on the radar of options traders. The VIX continues to move to lower levels, and is not signaling an immediate pickup in volatility. Speaking of bearishness, the AAII poll today showed that bears have spiked to 48.4%, while bulls have fallen to 28%.

Yesterday's rally faded after the FOMC announcement, but still finished positive. Today's session is adding to those gains so far, which would mark the 3rd straight positive session. I would not be surprised to see the market lift further as we near quarter-end. As I mentioned, I am still looking for some spots to take partial profits. I have sold my SSO position, and also taken profits on ESRX, which I added a couple of months ago.