Breakout

Stocks on edge as Fed begins crucial policy meeting

Jeff Macke
Breakout

Markets were subdued on Monday as traders focused on the World Cup, summer vacation and just about everything they could think of other than trading. The S&P 500 (^GSPC) finished at 1,937 on Monday, down from recent records but still well ahead for the year.

Now attention turns to the government and whether or not the Fed will do anything to upset the apple cart. The FOMC starts another 2-day meeting and no one is expecting Yellen and Fed policymakers to deviate from its well-telegraphed course when it comes to tapering Quantitative Easing. From the current $45 billion a month in total outlays the Fed will most likely chop out another $10 billion, just as it has been doing at every meeting since it started the taper back in December.

Jonathan Hoenig of the Capitalist Pig hedge fund says Fed actions may not be as hotly debated as in years past but the group remains the wild card for a bull market that’s starting to show its age. “I don’t think the bull market is broken but I think it’s transitioning from high beta, high fliers to more value oriented stocks,” Hoenig says in the attached clip. “I think Yellen and the Fed in general is and will continue to have a major impact in terms of where the stock market goes from here.”

Though the Fed will no doubt tweak its monthly statement, it’s the press conference tomorrow that holds the most dramatic potential. During her March press conference Yellen implied the first hikes in actual interest rates could come “something on the order of 6 months” after tapering ended. Given the histrionics that ensued don’t expect Yellen to be so casual with her phrasing at this presser.

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