U.S. stocks are little changed this morning as Federal Reserve Chairman Ben Bernanke begins his two-day round of testimony on Capital Hell, with the S&P 500 (^GSPC 0.96%) and the narrower, price-weighted Dow Jones Industrial Average (^DJI 0.42%) up 0.28% and 0.1%, respectively, as of 10:10 a.m. EDT.
Everything you need to know about the Fed chairman's testimony
And speaking of Mr. Bernanke's testimony, in yesterday afternoon's commentary, I wrote:
Don't expect any surprises from Bernanke, who will be satisfied to keep hammering his audience with the stance articulated at the last Federal Open Market Committee meeting.
Furthermore, the Fed's policy path will ultimately depend on economic data that isn't available yet -- it's more than likely the central bank does not itself know at this time precisely when or how it will begin tapering its monthly bond purchases (i.e., "quantitative easing").
In his prepared testimony at the hearing before the Committee on Financial Services, which began at 10 a.m. EDT, Bernanke reiterated the provisional "taper" calendar the Fed laid out last month, according to which it would begin to reduce its monthly bond purchases later this year before ending them roughly midway through 2014. However, he was careful to qualify this:
The Committee's decisions regarding the asset purchase program (and the overall stance of monetary policy) depend on our assessment of the economic outlook and of the cumulative progress toward our objectives. Of course, economic forecasts must be revised when new information arrives and are thus necessarily provisional. ... I emphasize that, because our asset purchases depend on economic and financial developments; they are by no means on a preset course.
If anything, the full testimony suggests that Bernanke has made a slight shift toward maintaining easier monetary policy longer -- The Wall Street Journal's Jon Hilsenrath reads the tea leaves for you here.
Yesterday, I also wrote that "for long-term fundamental investors, Bernanke's trip to Capitol Hill is a non-event; for traders, on the other hand, it's vital stuff." Let me explain why that is: With the S&P 500 around 1,680 this morning, roughly 90% of the index's value is attributable to earnings that companies will generate in 2015 and beyond. What possible difference could it make to underlying business values if the Fed were to extend the quantitative-easing calendar by one quarter, six months, or even a full year, except inasmuch as this reflects changes in the economy (which we cannot foretell)?
