Sell in May Fails to Appear; Markets Await Bernanke

Federal Reserve Board Chairman Ben Bernanke
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Federal Reserve Board Chairman Ben Bernanke

The big event this week is Wednesday, when U.S. Federal Reserve Chair Ben Bernanke testifies in front of the Joint Economic Committee, while the Fed releases the FOMC minutes to the April 30 and May 1 meeting.

The markets were all aflutter last week as John Williams from the San Francisco Fed (a dove) indicated he wanted to taper off purchases sooner rather than later.

But Bernanke is likely to reiterate exactly what he said at the May 1 meeting: that they are "prepared to increase or reduce" their bond purchases as the labor markets or inflation outlook changes.

(Read more: Bulls Will Be Driving Market, but Bernanke Is Steering)

It seems pretty clear to me that the Fed will need three or four months of unequivocal signs the economy is improving before it cuts back on its purchases. Thus far, such evidence is sorely lacking.


1) Sell in May? Well, at least not yet...the S&P 500 Index is up 4.4 percent. May has been terrible for the last several years, with the S&P down 6.3 percent in 2012, off 1.4 percent in 2011, and wilting 8.2 percent in 2010.

In fact, the second quarter has been the weak spot for stocks for years: Q2 for the S&P was down about 10 percent in 2012, 19 percent in 2011, and down 16 percent in 2010.

Traders who think the markets have entered a new, wilder, more speculative phase point to stocks like Tesla going from $50 to $90 in a few days, or to Big Data IPO Tableau Software, pricing Friday at $31, opening at $47, and closing over $50.

2) The end of the yen slide? The yen is up this morning (a rare event) as Japanese Economics Minister Akira Amari told a talk show, "People say the excessively strong yen has corrected quite a bit. If the yen continues to weaken steadily from here, negative effects on people's lives will emerge."

3) About the Yahoo deal for Tumblr: I do get it: the tech giant is trying to buy younger eyeballs. Still, Tumblr offers 100 million blogs, and 36 million unique visitors in the U.S., 117 million worldwide? That comes out to one person per blog, which is a strange metric. And the price tag is questionable: $1.1 billion? Seems like an awful lot of money to me.

On one hand, Yahoo! has a poor presence in both social media and mobile. They have to do something to change that. However, we know the people who use these social media sites hate to see ads. I know, Yahoo is betting the deal will increase its audience and traffic. Still, the company has revenues of $5 billion a year; from what I can see Tumblr generates $13 million in revenues. Paying $1.1 billion for a company that will not have any revenue impact at all — doesn't that make it the ultimate long-shot investment? Yikes.

OK, maybe Tumblr will turn out to the same as Google purchase of YouTube. Maybe. Having said that, Yahoo just spent a large part of its cash (about 20 percent of it, which it could use to buy back stock) on a very long shot.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.