Market Alert - Pre-Market

Futures vs FV: SP +13.35; DJ +123.93; NASDAQ +54.45

Release the doves. Futures are surging. Yellen's testimony is an incredible backtrack, some would say politically motivated, in terms of the economy and what the Fed will do. Tuesday night Fed governor Brainard said the Fed did not have much farther to go. She must have been channeling Yellen, must be her spokesperson on the Fed, because Yellen has not only echoed this but has expanded it.

Yellen sees 'equal odds' the US economy will be stronger or will be weaker. GDP forecast for 2017 is a meager 2.2%; 2018 is worse at 2.1%.

Sure Yellen sees additional gradual rate hikes over the next years . . . but even so she expects rates AND the Fed balance sheet to remain lower than historical levels.

Apparently, Yellen believes the economy cannot move much faster than it is now.

Perhaps her gloom is well-founded. The Trump presidency is plagued by those rabidly attempting to turn any molehill into a mountain and the multiple self-inflicted gunshot wounds that are forestalling the much needed legislative agenda to get the economy past that 2.1% Fed forecast. If the issues with the ACA and other legislation and regulation are not removed, then INDEED the US will never get back to its historic growth rates because small businesses will be permanently hampered. I said that years ago and nothing has changed.

Bonds are, of course, rallying.

So, we are back in a market rally based upon perpetually lower interest rates. As Art Laffer points out this morning, perpetually low interest rates are just not good for economies. They forecast weak growth, weak demand for money, cause misallocation of funds, and of course, bubbles such as the housing bubble that got all of this started back in Greenspan's time.

But for markets, they love it. Futures surged on Yellen's cooing.


OTHER MARKETS
Bonds: 2.305% vs 2.361% 10 year

EUR/USD: 1.1438 vs 1.14682

USD/JPY: 113.09 VS 114.063

Oil: 45.94, +0.90. Nice surge in oil prices as oil jumps off the test of the break back into the range.

Gold: 1224.20, +9.50. Nothing like a dovish Fed to get gold going upside again.


Futures are solidly holding gains into the open, surging on the Yellen testimony release and holding those gains the past 20 minutes. That is the main story today. Period.

Stocks will gap higher and while they likely test the move to some extent, with the doves now having the market's POLITICAL as well, the Fed put, the constant bid, is back in the market.


Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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