The critical stock market factor today will be the degree to which Fed Chairman Bernanke gives any hints in testimony before congress at 10:00 ET that another round of quantitative easing (QE) is coming. Futures suggest an up open of about 5 points in the S&P.
Expectations (or hopes) of another round of the Fed increasing credit and liquidity through bond purchases to stimulate the economy have been an important backstop to the stock market lately. The economic and earnings data have been uninspiring, but the stock market has held in a trading range because another round of QE would boost stock prices.
Bernanke is unlikely to directly suggest another round of QE given the opposition expressed by some FOMC members recently, but he is likely to say something to the effect that "the Fed stands ready to act as necessary." Ambiguous statements from Fed Chairmen often make for short-term market volatility.
Earnings reports this morning are decent. Coca-Cola had a good report that included profits and revenue ahead of expectations. The revenue number may be the main reason the stock is up pre-market. Johnson & Johnson reported profits a penny ahead of expectations, but revenue was down from last year and below forecasts. The stock is indicated lower. Goldman Sachs reported well above estimates for profit and revenue although revenue is down 9% from a year ago; and the stock price is down over 20% from a year ago but indicated higher today.
Some good news on the inflation front: the Consumer Price Index was flat for June. This follows -0.3% in May and leaves the index up only 1.7% over the past year. The drop in prices at the gas pump recently has kept the index from rising. The core rate, which excludes food and energy prices, was up 0.2% for the fourth straight month and is up 2.2% over the past year.
There are a lot of earnings reports still to come this week, but today, all eyes and ears will be on Bernanke.
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