Stocks remained relatively flat to start the trading week, following a day off from trading to honor President’s Day. The Dow Jones and the S&P 500 showed little change throughout the day, while the Nasdaq managed to post some mild gains.
Investors are at a standstill, caught in a limbo of how to react to market news. Hope has been restored that new Fed Chair Janet Yellen may continue the economic stimulus spending known as QE. Investors are cautious to leave stocks as they may be due for more stimulus fueled gains in 2014. As investors wait on the Fed guessing game, corporate earnings will take center stage and will be received as an indicator of our economic health. So far, corporate earnings are not painting a pretty picture, as Coca-Cola dropped almost 4 percent after the company reported that it missed analyst estimates.
What remains to be seen is how investors will react to any bad news. In 2013, under the Federal Stimulus spending, stocks were stuck in bizarro world. The stock market would rise in reaction to bad economic news, as investors assumed that would lead to increased stimulus. And vice versa, good economic reports were not well received on Wall Street. It is possible that Janet Yellen’s position on where to go with the Fed stimulus spending could lead to another reversal of investor psychology.