Monday, June 6, 2016

Federal Reserve Chairwoman Janet Yellen speaks today at 12:30 ET. This long-awaited speech was originally expected to be some measure of announcement that the Fed would raise interest rates in June. Now, with the absolutely anemic 38K non-farm payroll jobs released last Friday, a raise looks off the table.

Now with this new information, investors expect a detailed explanation of why the Fed will again delay raising rates. We’re at a 0.25 percent rate today and since December 2015, whereas rates had been cut to zero prior. With this explanation, expect plenty of parsing terminology to get at the true meaning of her words. (Janet Yellen, like her predecessor Ben Bernanke, has always been less oblique in her rhetoric regarding the state of the economy compared to Bernanke’s predecessor Alan Greenspan.)

Banks and insurance companies are among those hoping for — relying on, in fact — raising interest rates, as this is the bread and butter of these companies’ earnings. They are both part of the greater Financials sector, which has underperformed in quarterly earnings as analysts project outward whether rates will go up, thereby allowing for greater profits for financials.

We expect traders to be holding their collective breath until Yellen’s speech today, barring any other headline-making news that affects the economy. Investors will parse through the “known knowns” (thanks to Donald Rumsfeld for this phraseology) in order to determine the strongest stocks in which to invest in the near term. Always check your favorite company’s quote page on www.zacks.com to see its Zacks Rank (#1 - #5, Strong Buy to Strong Sell) and Style Score (grades A through F).

Mark Vickery
Senior Editor