Link: A Boon for the Banks

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The markets fell Wednesday following comments from new Federal Reserve Chairperson Janet Yellen, and this morning we saw a bit of follow-through to the downside.

The Federal Reserve announced that it would pull another $10 billion per month from its quantitative easing program. Also, in response to a question on the timing of tightening interest rates, Yellen indicated that it could happen as early as six months from now. If the Fed does tighten in six months, this would be a little sooner than when most analysts had been expecting -- but it certainly isn't a surprise that higher rates are coming, if the economic data continue to show improvement.

The Fed will remain data-dependent, and so will we -- and, in the last few weeks, we've seen better macroeconomic data (and have written about it). This week, moreover, came a few company-specific data points confirming the better trends.

Over the last few weeks, the government data have shown that the Chicago purchasing managers index, the U.S. Markit PMI, the Institute for Supply Management surveys, industrial production and capacity utilization levels have all improved from the weakness seen in January. That month, of course, had been largely plagued by the weather.

On the companies front, we attended a Merrill Lynch industrial conference, and several presenting companies confirmed the improvement -- albeit slow -- in the U.S.; improvement in China, although most are expecting a modest China; and a sluggish Europe. These companies included such firms as General Electric (GE), 3M (MMM), Parker-Hannifin (PH) and Ingersoll-Rand (IR).

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