Will The Fed Comment On Further Easing Measures?

The market is lower in early trading on the heels of a weak economic report. Of course, the Fed meets later today, and most participants will take their cues from their statement that will be released later.

The big question is whether the Fed will make comments about further easing measures. I doubt it. I think it is more likely that they will talk about the economy still being weak, saying they will keep rates low, and maybe something about policy remaining flexible. But I doubt the message will change all that much from what they have said the last couple of meetings.

If the market were higher, then I would say it is possible investors could be disappointed by today's Fed statement. But if the market is down going into the meeting, maybe the reaction will be more muted. I tend not to read too much into the market action on Fed meeting days, as it tends to be volatile.

The economic report that caused the selling in the markets this morning was the nonfarm productivity report, which showed a -0.9% decrease when a slight gain was expected. Unit labor costs increased 0.2%, but this was lower than expected.

Asian markets were lower overnight, and Europe is down this morning also. The euro is down for a second day, while the dollar is higher. Commodities are mostly lower, with oil prices down below $80, and gold below $1200 again at $1195.

The 10-year yield is up at 2.83%, and the volatility index (VIX) is spiking +7.2% to 23.75.

Trading comment: Although volume was light yesterday, the action was pretty positive. Lots of leading stocks making new highs. Today, the S&P 500 is testing that 200-day average I have been talking about. The 200-day is currently at SPX 1115, so today's action bears watching.

As for investor sentiment, it remains subdued. The AAII bull/bear survey last week showed more bears than bulls (30% bulls, 38% bears) for the 4th time in 6 weeks. So sentiment is not so bullish that it would make me cautious yet. I think the market could rally higher, which would bring out more bulls, before running out of steam. But let's take it one day at a time, and see how the market reacts to the Fed today.