Bernanke Defends His Policies

Fed Chairman Ben Bernanke's prepared remarks read more like a defense of his leadership than an assessment of the economy.
 
In his semi-annual testimony before Congress, Bernanke spent most of his verbiage discussing the Fed's actions in responding to the financial crisis and its steps to protect the consumer. He also said that plans for an exit strategy were being developed.
 
Typical of the Chairman's comments was this statement: "Many of the improvements in financial conditions can be traced, in part, to policy actions taken by the Federal Reserve to encourage the flow of credit."
 
As far as the state of the economy, Bernanke opined that the U.S. is moving towards stabilization, but that the labor markets will remain weak. He does not anticipate inflationary pressures in the foreseeable future, and basically ruled out any rate hikes this year.
 
Though there was some news for bond traders, by and large, Bernanke's comments really did not provide much new insight into central bank policy. Rather, the Chairman seemed more focused on keeping his job and defending his actions.
 
The take-away from this morning's testimony is that Bernanke is aware of the economic environment and is prepared to react accordingly.

For stock traders, however, the focus should be on earnings announcements. We've already seen Caterpillar (CAT) and Coca-Cola (KO) top expectations this morning, and we'll see if Apple (AAPL) can continue the trend after the market close.

The S&P 500 (SPX) is above resistance, but it will take more good news on the earnings front -- not more words from Bernanke -- to send stocks even higher.

The full text of Bernanke's speech can be viewed on the Fed's web site. http://www.federalreserve.gov/newsevents/testimony/DBBB5C9F26B6440AA4A21E104A61577A.htm

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