Markets hope to hear from gentle Ben on Wednesday morning

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Recapping the day's news and newsmakers through the lens of CNBC.

Don't rock the boat


On Monday, we wrote that Federal Reserve Chairman Ben Bernanke's dovish comments last week on a slowdown of the Fed's bond-buying program probably signaled relatively smooth water for the markets for the near future.

Pimco CEO and co-CIO Mohamed El-Erian appears to agree, saying that Bernanke is unlikely to say anything disruptive day during his testimony before Congress on Wednesday—likely his last as chairman. Whatever he says will be digested by the market before Wednesday's opening bell, as Bernanke's testimony was moved up to 8:30 a.m. from 10 a.m.

But will anyone even pay attention to Bernanke? Some believe the market will hear what it wants to hear. If people expect that the Fed is no longer on track for tapering in September, Bernanke's words could ignite taper embers. If they expects a taper, the latest Fedspeak could assuage.

Another market watcher said investors are sleepwalking under Bernanke's influence. And another said the taper is already priced into the market.


"He's going to try to do a high-wire act without the excitement. And he's going to try not to rock the boat, especially given that the economy is tracking about 1.2 percent growth. So he doesn't want to cause any excitement because he doesn't want the economy in any way to be disrupted. That's what he's going to try to do but that's going to be really hard because the markets are looking for something definite."
—Pimco CEO and co-CIO El-Erian

"To my belief, I think the policy at the Fed right now is that it will taper in September. And unless there is a change in the forecast that looks for a strengthening in the economy in the second half, I think the Fed is probably still on track there. Now if the market believes that that is not the case, then I think that maybe tomorrow, maybe over the next few weeks if the economic data comes in that does point to a second half rebound, then I think the market is going to have to re-digest the news that there's a tapering coming in September."
—CNBC's Steve Liesman

What a difference a year makes


One year into Marissa Mayer's tenure as chief of Yahoo, the company has acquired 16 companies and seen its share price rally by 70 percent. Mayer also made moves to change the struggling company's culture, such as introducing free lunch, ditching its work-from-home policy and extending its parental leave policy. Not bad, right?

But analysts warn that the share price rise has more to do with the rise in value of its assets in Asia than changes here at home. Those will take longer, but at least all the pieces have been put in place.

Yahoo reported earnings after the closing bell today, and its revenue came in short of Wall Street expectations, while the company also guided to below the street's expectations for revenue in the next quarter.


"From here on in, I do think the easy money has been made, but I believe that Marissa has done a pretty good job of increasing the value within core Yahoo. Not so much yet in terms of revenue and bottom-line profits but in terms of increasing morale, doing some smart, small acquisitions as well as the big one in terms of Tumblr. The stage has been set, just results will probably take a little bit longer."
—Darren Chervitz, co-portfolio manager at Jacob Asset Management

Home builders unexpectedly confident


Home builder confidence unexpectedly surged six percentage points in July to its highest level since January 2006, registering its third gain in as many months. Many expected rising mortgage rates to keep the number flat, but builders seem to be seeing some relief with easing land, labor and materials costs.

According to the National Association of Home Builders, the index stands at 57, with 50 the dividing line between positive and negative sentiment. Of the index's components, current sales and buyer traffic rose five points each, and the measure of sales expectations was up by seven points. Buyer traffic was the only measure in negative territory at 45.

That's not to say that home builders don't see possible headwinds coming; policy changes such as rising rates or the possible erosion of the mortgage interest deduction could claw back some of their optimism. And the optimism isn't necessarily shared by cash-starved smaller home builders.


"This is a very unexpected jump given the rising mortgage rates."
—CNBC's Diana Olick

"If I had in mind buying a home anytime soon, the uptick in rates would get me off the dime."
— Bob McTeer, former Dallas Fed president

Goldman exceeds expectations


Make it four for four, as Goldman Sachs is the latest big bank to report better-than-expected second-quarter numbers. The bank's quarterly profit doubled, far exceeding Wall Street's predictions, as its net income better than doubled to $1.86 billion from $927 million over the same quarter last year. Goldman's fixed-income, currency and commodities trading unit saw a gain of 12 percent, while its investing and lending businesses saw huge gains mostly because of a tripling of revenue from debt and loans.

Goldman joins Citigroup, JPMorgan Chase and Wells Fargo in reporting pumped up earnings lately. But while those banks saw their share prices sizzle on the good news, Goldman's shares fizzled today, finishing down almost 2 percent.


"The investing and the lending segment is a bit of an analytical black box. It has a few kinds of assets in it, both equity, public and private, and fixed income. And while the fixed income throws off the earnings in a more sustainable way, the gains component is very difficult to predict. So in this period you had very significant gains, which of course is positive for the earnings, but in terms of affecting the outlook of the back half of the year, it is difficult to say it has meaningful influence."
—Eric Wasserstrom of SunTrust Robinson Humphrey

Unjustified optimism?


After some jitters, the market has put together some nice gains so far this month, especially following Ben Bernanke's assuaging words (see above). Profits at big banks have surged and optimism now reigns despite the dark cloud of rising rates and the eventuality of less Federal Reserve support. But what about some of the other indicators that have been all too easily cast aside?

At least one contrarian says the bulls are ignoring major risks to the market. For example, real GDP in the second quarter is now under one percent just when companies expect to see economic acceleration in the second half. On top of that, Brent crude is topping $110 a barrel and UPS, a bellwether of the U.S. economy, has said that it expects more pricing pressure from consumers seeking cheaper shipping options. Want more evidence? Well, Coca-Cola has reported weak U.S. case shipments and Citigroup has said the North American consumer outlook is weak as well. Could we be in the calm before the storm?


"Refinancings are collapsing, an important source of household cash flow, and now the Fed is on the doorstep of tapering and interest rates are climbing. The U.S. dollar is getting stronger laying the ground for weakening exports. Despite all of this, strategists and market bulls are almost universally pointing to a stronger second half this year. That's formed the framework for market optimism. I think it's totally unjustified."
—Doug Kass, president of Seabreeze Partners Management

By Doug Cubberley, Special to