The Federal Reserve failed to raise its policy rate at its March meeting.
Sounds good and, perhaps, gives Fed officials a couple of more months where the pressure to raise rates will back off. Maybe….
But, the Federal Reserve went from October 2014 until the middle of December 2015 promising to raise interest rates. It then promised four rate hikes this year.
The Fed has done little or nothing to help its confidence rating.
Although market participants don't seem to have much confidence in Federal Reserve leadership, investors still have the mindset that it is not wise to bet against Federal Reserve intentions.
And, these market participants responded to Yellen's speech exactly as they did when the news was released that the Fed would not move its policy rate in March. See the link presented in the first sentence of this post.
At noon, the S&P 500 index was trading around 2,035, slightly below the 2,037 it closed at last evening.
As the news on Ms. Yellen's speech got out the index rose immediately to about 2,042 and by three o'clock the S&P 500 index was over 2,053.
Around noon, it cost about $1.1200 to purchase one Euro. After the speech, the one Euro cost over $1.1250 and by three o'clock a Euro cost over $1.1300.
In the bond market, the yield on the 10-year Government note closed to yield about 1.889 percent last evening. By noon, the yield had dropped to 1.847 percent and at three o'clock the yield had dropped to close to 1.800 percent.
My reading of the financial markets is that investors don't like the current stance of the Federal Reserve with respect to its interest rate policy, but will not fight it when they get confirming information that no change is due.
Also, the question is being raised that the Federal Reserve is a part of a conspiracy devised at the recent G 20 meeting to try and stabilize the foreign exchange markets. I produced something on this on March 22.
Just this morning Roger Blitz, Leo Lewis and Jennifer Hughes wrote something similar in the Financial Times: "Has Truce Been Called in the Currency Wars?".
Whatever the reason, the Federal Reserve seems to have backed off its "forward guidance" from earlier this year.
It just seems as if it is now working to eliminate any justification for a raise in rates this year. I don't think that they have the courage for any such moves. I do wish, however, that they would have the courage to quit providing "forward guidance". Their efforts to provide "forward guidance" over the past 17 months has done little more than hurt their reputation.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.