After so many consecutive slides, a relief rally was expected at some point. While today’s gains are sold rather than outstanding, the gains are broad-based, with two stocks gaining for every losing one on the New York Stock Exchange.
After a dodgy start, earnings are starting to come good – 30% of the S&P 500 companies have reported for the last quarter so far, with around 69% having beaten estimates for earnings, with a similar percentage surpassing forecasts for revenue. That should help the market to keep some of today’s momentum going, especially with risk-aversion starting to abate, as emerging market currencies begin to recover from last week’s steep falls.
The FOMC began its final meeting under the stewardship of Ben Bernanke today, with an announcement to be made tomorrow at 7pm GMT. Based on recent comments made by some centrist officials at the Fed, there is a fair chance of a further reduction to stimulus. Given the choppy week we had last week, the weak unemployment figures in December and no big pick-up in inflation, I would not be too surprised if the committee defers another taper for now though. Certainly, I expect forward guidance to remain very accommodative.