Overnight markets were essentially a sea of green and the recent stock market rally continued here as well, with the testimony by Fed governor Janet Yellen merely reiterating the status quo, i.e., the Fed will continue to taper if the data support it, otherwise it will figure out what to do next. Through midday the indices had gained about 0.5%, with the Dow doing a bit better.
Also Known as a “Belief Rally”
Some folks may have scratched their head about why stocks have rallied, given that the Fed has continues to taper, but we can't lose sight of two things: the market just had a pretty nasty setback, so it is bouncing, and a lot of folks believe that the Fed knows what it is doing, ergo, if it stays the course that is supposedly bullish. In any case, I hesitate to draw too many conclusions about how sanguine the equity market may be regarding Fed tapering until we see where this rally stalls.
But there was no stalling today, as the indices kept grinding higher all day, led by the Dow, which gained 1.5% (as of the last half hour, when I had to leave).
Away from stocks there was a bit more motion. Green paper was generally weaker against the major currencies, though emerging market currencies were subject to the same sort of pinball action we have seen, though that didn't matter much today. Fixed income was weaker and the metals added 1%, plus or minus.
Down in Front!
It is interesting to note that lease rates have become more negative and backwardation has gone out to three months, even as the gold market has rallied. I don't recall ever seeing lease rates tighten up like this during a rally. I'm not sure exactly what it means, but it is hard to believe it is bearish.
