Wednesday, April 27, 2011 9:24 am EDT
S&P 500: 1347.24
Nasdaq Comp.: 2847.54
Russell 2000: 852.89
It’s all about the Fed today, as it wraps up its FOMC meeting and releases a “statement” at 12:30. Until now, its practice has been to release it at 2:15 p.m.
Fed Chairman Ben Bernanke will follow that up at 2:30 with his first ever press conference.
No need for me to speculate about what the Fed’s message will be, far smarter students of Fed policy have been taking a stab at it on financial news channels this morning.
Simply stated: At some point, the Fed must unwind its policies to stimulate the economy, but that must be done carefully so as not to jeopardize the economic recovery already in place. With commodity prices soaring, the risk of inflation is a growing concern, raising the chances that the Fed will have to counter in the near future with a rise in interest rates.
I think we will get some clarification today, that’s why I think the FOMC scheduled an early release of a statement and chairman Bernanke is following with a press conference.
Meanwhile, the economy continues to gain traction, as Durable Goods posted a 2.5 percent gain for March vs a decline of 0.9 percent in February.
And the stock market continues its relentless push upward in face of better-than-expected Q1 earnings reports.
It appears institutions are in near-panic mode, scrambling to invest cash that has been coming in as the individual investor is increasingly gaining confidence that the economic recovery and bull market are the real deal.
At some point, I expect a speculative spike, which would be followed by a sharp sell off. Whether that is triggered by a change in Fed policy or simply a “technical” reaction is uncertain.
Money can be made, when the market boils like this. However, it must be remembered that corrections mostly occur under these conditions, ergo justifying caution and a cash reserve as one works the remaining funds in line with their tolerance for risk.