There's no data of note Tuesday, but Bernanke takes center stage with his semi-annual testimony on monetary policy before the House Financial Services Committee, starting at 10 a.m. The House committee on Oversight and Government Reform also holds a 10 a.m. hearing to receive the report from Neil Barofsky, Special Inspector General for the TARP.
As far as the Bernanke hearing, some bond market traders have been hoping to hear more about the Fed's quantitative easing program. Economists do not expect the Fed chairman to say much new about that program, under which the Fed buys Treasurys and mortgages.
Atlanta Fed President Dennis Lockhart, in fact, said Monday that the Fed is continuing to review its $300 billion Treasury purchase program and will discuss it at its upcoming policy meeting and future meetings. He said he personally has not decided where he stands on the issue.
Congress is also expected to ask Bernanke about the Fed's exit strategy from its market bail out programs.
From 'Mad Money':
"I don't envy him. He's got to them enough about he's going to take away the punch bowl, so they've to believe them but he can't tell them enough so they trade against him," said Cashin.
Deutsche Bank chief U.S. economist Joseph LaVorgna said there's not much Bernanke can say. "I think he's going to say we're on hold indefinitely. Until the Fed sees the unemployment rate stabilize, they can't even begin to talk about reversing course, whether it's exit strategy, rates or anything," he said.
Monday's report of a 0.7 percent gain in Leading Indicators to 100.9 was its third monthly gain and a definitive positive, LaVorgna said. "I think the numbers show the economy is bottoming and turning up, but I don't know how strong it's going to be."
From 'Fast Money':
"The question you have to ask yourself is 'can the (stock) market go back to Lehman levels now than the credit markets are back to pre-Lehman credit levels?' That's a very valid question for investors, and if that's the case, the market has some room to run," said LaVorgna.
Widely followed economist Nouriel Roubini appeared on "Closing Bell" Monday, and reiterated his view that the economy should hit bottom at the end of the year. He said he expects a "sluggish, U-shaped" recovery that has a chance of going into a "W," or double-dip recession. Roubini has said the news reports last week that quoted him as saying the worst is over were wrong, though they did add to the market's gains.
Commodities were mostly higher Monday, with gold up 1.2 percent at $948.50 per troy ounce, and copper up 1.9 percent at $2.4600 per pound.
The dollar finished down 0.9 percent against the euro at $1.4226 and declined very slightly against the yen.
"It's almost a Pavlovian trade right now," said Boris Schlossberg of GFT Forex.
"Earnings are okay, and I think that's what's basically happened. We are completely going lock, stock and barrel with the equities market right now," he said. "There is some upside risk that we break the ranges...If the news continues to be powerful. We had seven straight days of rally. If earnings continue to be good, if we go (above) 950 on the S&P, we could break those ranges."
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Schlossberg said the upper range on the euro has been $1.42-$1.43, and for sterling, it would be $1.65-$1.66. He said currency traders will continue to watch earnings, as well as Bernanke, who appears before Congressional committees for two days. Currency traders will shift focus Friday to data from Europe, including IFO business sentiment and purchasing managers.
On Monday, oil also moved slightly higher with the reflation trade. It rose $0.42 per barrel, or 0.7 per cent to $63.98.
"I've been kind of bullish," said M.F. Global senior vice president John Kilduff. "I thought the recent pull back would have lasted longer, but it didn't surprise me that we're snapping back. You see copper back at its highs. You're seeing some commodities in deficits, sugar and copper specifically."
"I think what we're seeing priced in is the tightness which could come back on us pretty quickly," said Kilduff.
According to Platts, analysts expect oil inventory data from the Energy Information Administration and the American Petroleum Institute to show a decline in commercial crude stocks of about two million barrels, during the week ending July 17. The API report is released Tuesday at 4:30 p.m. ,and EIA data is issued Wednesday at 10:30 a.m.
Other earnings reports Tuesday are expected from BlackRock, Schering-Plough, Comerica, Forest Labs, Freeport-McMoran, IllinoisTool, Lockheed Martin, Peabody Energy, Southwest Air, State Street, UAL, DuPont and Continental Airlines.
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