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While it was almost certainly not her intention, one ancillary effect of her comment has been to soundly disprove one of the biggest conspiracy theories about the Fed's easy-money policies.
In recent years, it has been popular for Fed skeptics to claim that the true goal of massive bond buying and low benchmark interest rates has not actually been the stated claim of bring the economy back from the brink and decreasing the unemployment rate to normal levels—both of which appear to have been accomplished.
The true goal of the Fed's policies, some suspected, has been to send stock prices higher as part of a surreptitious plot to create the "illusion" of economic growth.
Over the years, comments from Fed officials have made it plain that they watch asset prices carefully. Now, the idea that the Fed is a cheerleader of ever-rising prices has been cast into doubt.
"I don't really know why she chose to say that," said Euro Pacific Capital's Peter Schiff, one of the Fed's loudest doubters. "I mean, I don't really put much stock in anything she says."
However, when pressed by trader Scott Nations on CNBC's "Futures Now" Thursday, Schiff sounded a bit befuddled about how to interpret Yellen's words.
"I doubt she's trying to convince people to sell stocks, when you know that the very goal of quantitative easing... was to lift asset prices. So why would they intentionally undo what they deliberately set out to do?" he asked.
Fed chair Janet Yellen spooked investors Wednesday when she warned against sky-high equity values. And in a strange turn of events, she's finding an unlikely ally in her assessment in the form of her biggest critic, Peter Schiff.
On CNBC's "Futures Now," the outspoken Schiff said that the stock market is "more than just a little overvalued, it's extremely overvalued." But rather than defending Yellen's call, Schiff instead blamed the Fed's policies for the frothy valuations that Yellen was warning about.
According to Schiff's logic, the sky-high valuations for equities are a direct result of the Fed's easy money policies over the past couple years. Schiff said that "artificially low rates" have forced investors to buy stocks and in the process have made them more expensive.
"Janet Yellen was half right when she said the stock market was overvalued," Schiff, Euro Pacific Capital CEO on said on Thursday.
After falling to near record lows this year, U.S. bond yields are rising fast, leaving many investors fearing that we could be witnessing the end of a historic run in U.S Treasurys. But while bond watchers focus on economic data for clues on where rates are going next, one well-known strategist says not to look at the U.S. economy, but rather overseas.
On CNBC's "Futures Now," bond expert Ira Jersey suggested on Tuesday that Europe, specifically the German bund, holds the key to where U.S. rates will go next. And by his work, the selling might be over.
"When we were at about 10 basis points on the German 10-year yield, the consensus was it was going to go to zero," said Jersey, head of U.S. interest rate strategy at Credit Suisse. "But once we started to see crude oil rise and some positive data out of Europe, people thought maybe things weren't right."
Rates in the U.S. have fallen despite rising stock prices and falling unemployment, typically two things that weigh on bond prices. And according to Jersey, the move higher in U.S. treasurys has been fueled by heavy buying of foreign bond yields. The benchmark German 10-year yield is at 50 basis points, considerably lower than the U.S. 10-year bond.
However, in a sudden turn of events, German bonds have been selling off, and that has hurt prices for U.S. bonds. Bond prices and yield move inversely.
According to Jersey, the selling pressure in German bonds may soon abate, spelling relief for U.S. investors.
We suspect there may be some stabilization [soon], but there certainly could be some [continued short-term] weakness on the horizon, given how many people played along with the ECB and started to buy a lot of German and other core European yields."
And despite increased fears of more selling pressure at home, Jersey said the U.S. is the safest place for investors to look for yield.
"The correlation between Europe and the U.S. over the past 12 to 13 months has been quite astounding," said Jersey. "The fact is the U.S. is, ironically, the high yielding of the major bond markets. If you look at where Japanese yields are and you look at where German yields are, the U.S. is the liquid market when you need some type of yield," he added, noting that compared to 50 basis points in Germany, U.S. yields are quite substantial.
Economic data always threaten to bear us back, like "boats against the current" in the closing line of F. Scott Fitzgerald's The Great Gatsby, ceaselessly into the past.
Such was the case this past week, when a surprisingly weak initial gross domestic product report showed that the American economy grew at an annualized rate of just 0.2 percent in the first quarter. Fresh concerns about the economic recovery ensued, sending stocks on a roller-coaster ride and recalibrating expectations about the economy.
But the most important use of backward-looking data is to sketch out what the future may bring. And the outlook for the American recovery may be bright indeed.
Thursday brought two very encouraging signs about the labor market. Initial unemployment claims fell to 262,000 for the week ended April 25th, the lowest reading in 15 years. And in the more backward-looking employment cost index, U.S. wages were shown to have risen by 2.6 percent in the first quarter versus the year prior.
On Friday, investors should get a decent flavor of how the past month shaped up, when the April employment report is released. Many economists are expecting to see positive signs in the report.
"Given the sturdy trends in jobless claims and tax receipts, we expect a meaningful rebound in April employment," wrote Joe LaVorgna, chief US economist at Deutsche Bank, in a Friday note.
More generally, the fact that GDP has tended to disappoint in the first quarter—only to bounce back substantially in the second—is a trend that has been lost on few.
For instance, final GDP in the first quarter of 2014 (which fell considerably from the initial reading) came in at negative 2.1 percent; the Q2 reading that followed showed 4.6 percent annualized growth.
An analysis by CNBC's Steve Liesman found that over the past 30 years, annualized first-quarter GDP growth has come in at 1.87 percent while the economy has grown 2.7 percent. That was statistically significant enough to lead the GDP tabulators at the Bureau of Economic Analysis to remark to CNBC that "BEA is currently examining possible residual seasonality in several series."
The S&P 500 is 2 percent from its all-time high, but one top technician says there's more to the charts than meets the eye.
On Tuesday's "Futures Now," Altaira's director of technical analysis, Ralph Acampora, said the market is in a "stealth correction."
"The market is frenetic here. What I see is a two-tier market," said Acampora. "Under the surface there are some issues not doing well at all."
He noted the performance of large-cap stocks has trailed that of small- and mid-cap stocks. The Russell 2000 is up nearly 5 percent year to date, while the S&P 500 is up 1 percent over that time.
But most troubling to Acampora is the underperformance of the transports, which have badly trailed the S&P this year. "The Dow Jones transportation average peaked in December of 2014 and hasn't made a new high this year," he said. "For those who follow the old theory, the market is on hold."
To note, the "Dow Theory" is an old technical indicator in which investors believe that if the industrial or transportation average were to make a new high or low, the other would follow suit. According to Acampora, the Dow Jones industrial average would need to fall below 17,089 in order for this theory to come to fruition, and it could lead to a 5 to 10 percent correction.
While crude oil has surged nearly 40 percent from its recent lows, natural gas has remained in the dumps, falling 4 percent on the year despite Thursday's sharp 5 percent rise. But according to one highly regarded technician, a confluence of seasonal factors and overly bearish sentiment could set the stage for an even bigger rally to come.
On CNBC's "Futures Now," Jonathan Krinsky said natural gas is on the cusp of experiencing a major "short squeeze" that could send the commodity up another 10 percent to $3 per Btu.
"While the structural chart is firmly bearish, we think a countertrend rally could be underway," said Krinsky, market technician at MKM Partners, on Thursday.
Most traders don't expect to glean any significant market-moving insights from the Federal Reserve's policy statement due Wednesday afternoon. But those traders risk getting caught unawares by a less-dovish-than-expected Fed, says George Goncalves, head of U.S. rates strategy at Nomura.
Referring to the Fed statement, Goncalves wrote in a Tuesday afternoon note to clients that "given market positioning and pricing, the risk is that if it sounds less dovish (or even neutral) the market will be offside."
In addition, Goncalves notes the risk that the Fed strikes a more optimistic tone about the economy, after the central bank wrote in its March statement that "economic growth has moderated somewhat."
"If it were to attribute the weakness in the economy as being backward looking, watch out!"
In other words, the statement could clarify that the Fed's thoughts on the economy moderating was an observation about the past, not a prognostication about the future. If the Fed is more optimistic about growth, that would give the central bank a reason to think about normalizing monetary policy sooner rather than later.
Either way, it will be interesting to see how the Fed reacts to Wednesday's surprisingly weak gross domestic product number, which showed the economy growing just 0.2 (annualized) in the first quarter.
The bottom line of earnings season adds up to this: companies are running into big trouble with their top lines.
While companies generally tend to beat both earnings and revenue expectations, this year more have missed their first-quarter top-line estimates than beaten.
Out of the first 201 S&P 500 Index companies to report first-quarter earnings, only 47 percent have beaten revenue estimates, according to FactSet. If this number holds, it will be the first time that more companies have missed than beaten earnings expectations since the first quarter of 2013.
Now, analysts on the whole expect to see S&P 500 revenue fall 3.5 percent year-over-year, whereas they had expected just a 2.6 percent drop when the first quarter ended.
Meanwhile, earnings have surpassed analyst expectations nicely, with 73 percent of companies beating earnings-per-share estimates, according to FactSet. That's equal to the five-year average percentage of beats.
If you're looking for value in U.S. stocks, you'd better look hard.
The S&P 500 Index's forward price-to-earnings ratio—the popular metric that measures how much investors are willing to pay for each dollar of expected future earnings—closed the week at 17.1, according to FactSet data. That's more than one-third higher than the P/E of three years ago.
Even with Friday's 1.1 percent drop, then, equities are not exactly at bargain level prices. (Tweet this)
"We're a value-driven shop, so everything we do is driven by the ability to acquire assets, stocks in particular, at a discount to intrinsic value," said Scott Clemons, chief investment strategist at Brown Brothers Harriman. "But there are precious few opportunities like that on the ground."
The S&P 500 is less than 1 percent from its all-time high, and according to one top technician, more records are just around the corner.
"We've already seen new, all-time highs registered by major indices in the U.S. and globally," said BTIG's chief technical analyst, Katie Stockton. "The S&P 500 has yet to do that, but I think it's a matter of time."
Stockton pointed out that despite a negative outlook for earnings, the initial reaction has been quite positive. "We're seeing breakouts [on earnings] on an individual stock level," she said. "The Russell 2000 has hit a new all-time high, and I think the S&P 500 is going to break out from what has become a bit of a triangle formation on the chart."
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