Will Bernanke taper talk rock the markets again?

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Fed Chairman Ben Bernanke is not likely to say much new when he testifies before Congress Wednesday, but even so, he could rock the markets.

"His prepared remarks are going to be pretty much in line. He's not breaking news," said Daniel Greenhaus, chief global strategist with BTIG. Fed Chairman Ben Bernanke will give his semi-annual testimony on the economy before the House Financial Services Committee. He appears at 10 a.m. ET to deliver his comments and take questions, but his prepared remarks will be released at 8:30 a.m. ET.

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Besides Bernanke's testimony, the Delivering Alpha conference, produced by CNBC and Institutional Investor, takes place in Manhattan. Treasury Secretary Jack Lew speaks, just before 8:30 a.m., and major investors, like Carl Icahn, Nelson Peltz and John Paulson will also be there. Preet Bhrarar, U.S. Attorney for the Southern District of New York, is also a featured speaker.

There are also dozens of early earnings, including Bank of America, Bank of NY Mellon, PNC Financial, Northern Trust, St. Jude Medical, Textron, Mattel and Novartis. After the bell earnings include American Express, Intel, eBay, Noble Energy, Kinder Morgan, El Paso Pipeline, and Sallie Mae.

Wednesday's economic reports include housing starts and building permits, at 8:30 a.m. ET, and the Fed's beige book on the economy is released at 2 p.m.

Fed Ahead

Bernanke has gotten a strong reaction whenever he has spoken about reducing the Fed's bond purchase program, or quantitative easing. Since early May, interest rates have move dramatically, from a low of 1.61 percent, right before the April jobs report, to a high of 2.75 percent when the June jobs report was released. Both reports showed progress, and nonfarm payrolls have now been running at a monthly pace of about 200,000 this year.

But between those reports, the Fed has also helped nudge rates higher with talk about tapering, and no official have been as powerful as Bernanke in moving the markets - in both directions.

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Bernanke's remarks about paring back on the Fed's bond purchases as far back as May set the markets on edge. He told the Joint Economic Committee that the Fed could start to taper after the next couple of FOMC meetings if the economy improved. Those remarks sent stocks lower.

Once more, after the Fed's June meeting, the Fed chairman elaborated on the possibility of the Fed slowing down its $85 billion bond purchases before year end. But he also said the Fed would base its decision on improvements in the economic data. Those comments sent stocks reeling and interest rates higher, as traders speculated if tapering was in sight, so must be a hike in interest rates.

Fed officials, in what seems to have been a coordinated campaign of speeches, spent the following week sending the message that short term rates would not be raised in the near future, and that any decision to cut back on bond purchases would be based on the economy's progress. The markets settled into a view that the Fed would cut back its bond purchases sometime in the fourth quarter, with many seeing September as the starting point.

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Then last week, Bernanke basically reassured the markets that the Fed would taper its bond buying when the economy is strong enough, and that the Fed is not planning to raise short term rates, or stop being accommodative for a long period to come. While the message was not much different, stocks rallied, the dollar fell and interest rates pulled back.

"It seems to me it's pretty damn clear. I don't know what is so confusing about what is said. They never said they were going to raise interest rates this year, and everybody pretty much knows if the data stays okay, they are going to taper. I think we are making far more out of this then we need to," said James Paulsen, chief investment strategist at Wells Capital Management.

Bernanke will testify before the Senate Banking Committee Thursday on the same topic Thursday.

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"This is not a guy that we haven't heard from in the last six months. I can't imagine he deviates from what he's been saying. You have to assume the majority of the near term correction has already occurred, if not nearly occurred, and the Fed must be happy that interest rate have gone up, the stock market is still at a record high and growth expectations, while still too optimistic, haven't come down with rising rates," said Greenhaus.

Deutsche Bank's Alan Ruskin, head of G-10 currency strategy, pointed out in a note that around the past six Bernanke testimonies, bonds rallied in the week before and rates backed up mildly on the day of the testimony. "I still see the risks on Bernanke as mildly risk negative, and similarly small USD positive, as he affirms the June FOMC message," Ruskin wrote.