Janet Yellen is slated to testify before Congress this week, and her words could reveal a great deal about what the new Federal Reserve chair will plan to focus on in her tenure at the Fed. As the unemployment rate drops to 6.6 percent, even as job growth appears anemic, any hints about Yellen's priorities in setting policy will be critical for investors.
"It's a huge deal for the markets," said Jim Iuorio of TJM Institutional Services.
Yellen will testify before the House Financial Services Committee on Tuesday, and the Senate Banking Committee on Thursday. The Fed chair is mandated by law to report to Congress twice a year, and for the first time since 2006, that chair will be someone other than Ben Bernanke.
A lot is on the line. The Fed has begun to reduce quantitative easing, cutting the monthly asset-purchasing program by $10 billion at each of the past two meetings. Another $10 billion taper is expected to emerge from the Fed's March meeting.
Meanwhile, recent news about the economy has not been great. The January jobs report showed a meager 113,000 jobs created by the nonfarm payrolls metric, substantially fewer than expected. Yet on the unemployment side, the jobless rate fell to 6.6 percent, which is awfully close to the 6.5 percent at which the Fed has said it would reassess the federal funds rate target.
(Read more: Whiplash: S&P futures soar, then plunge, on jobs)
That said, the Fed noted in its January statement that despite the guidance it has provided, the central bank continues to anticipate "that it likely will be appropriate to maintain the current target range for federal funds well past the time the unemployment rate declines below 6-½ percent, especially if projected inflation continues to run below the Committee's 2 percent long-term goal." The Fed's next move, then, is quite discretionary and perhaps a bit murky.