What will be the tone of FRB Chair Yellen’s testimony? Moreover ECB President Draghi also speaks around the same time. Talk about massive headline risk.
Will Yellen walk back the dovish Fed minutes from last week and tell the markets “patience” will be removed?”
Regarding Draghi, markets will be looking for reassurance on Greece and lending to Greek banks from the ECB. Draghi will probably discuss the ECB’s QE program and the benefits to the Eurozone.
It is widely accepted the BOJ, ECB and the Fed’s strategy is to drive up the price of risk free assets to push the markets toward risk assets. I think a strong case can be made that “risk free assets” are now prohibitively risky but with the central banks fearing deflation this is the really the only viable strategy given the inability of world governments—including the US—to pass meaningful reforms and polices that stimulates growth.
Speaking of the legislature, how will the funding for the Department of Homeland Defense be resolved? As widely known this agency may be shut down at the end of this week because of the immigration issue.
I rhetorically ask what will happen if the DHS is shut down and the threat towards to the Mall of America materializes? Wow!
There was little to write about yesterday’s market activity as all markets were relatively quiet.
Last night the foreign markets were mixed. London was up 0.12%, Paris down 0.12% and Frankfurt down 0.04%. Japan was up 0.74% and Hang Sang down 0.35%.
The Dow should open little changed before Yellen’s testimony. Several times I have commented about the narrowest of the market. According to CNBC, the entire gain in the NASDAQ 100 is from five stocks. Without these fives tocks the NASDAQ would be down. Wow! I have not witnessed such narrowness since 2000. The 10-year is off 2/32 to yield 2.07%.