Wednesday, March 19, 2014

Will Yellen Continue To Instill Confidence In Markets?

Markets are pretty subdued in early trading, which is not really the pattern we have seen recently.  Investors are awaiting the latest FOMC announcement today, where it is expected that the Fed will continue its 'taper' to the tune of another $10 billion.  Of course, that still leaves $55 billion a month in asset purchases.

Afterwards we will hear the first press conference from new Fed chair Janet Yellen.  It is always interesting to hear a new fed chair's communication style.  Investors hope that Yellen will continue to instill confidence in the markets as this bull market enters its sixth year, long in the tooth by historical standards.

In corporate news, FedEx missed earnings estimates but the stock is being given a pass given weather issues during the quarter.  Oracle also missed estimates and its stock is lower today.

Asian markets were mixed overnight.  Japan's trade deficit narrowed.  Europe's markets are also mixed today.  Eurozone labor cost index rose 1.4% vs. last year.

Commodities are mixed again, with oil prices bouncing to $100 and gold pulling back further to $1339.

The 10-year yield is slightly higher around 2.69%.  And the volatility index remains below the 15 level at 14.45 so far.

Trading comment: I don't think that Yellen will have any surprises for the market.  She likely wants to maintain an even tone and not cause any volatility at the moment.  Getting out of the quantitative easing game will not be an easy task, and I'm sure Yellen will have to answer questions about it, whether the economy can handle it, and when she thinks the Fed will start to raise rates.  Stocks continue to hang in there and trade in benign fashion.  Bond prices remain high and with the 2.60% level holding again recently as a floor, we could see bond yields creep higher from here.


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