By Carlos Guillen

After a week in which the Dow Jones Industrial Average was able to eke out a gain of just over four points, today stocks are making a phenomenal move to the upside, with the Dow so far gaining over 120 points mostly as a result of reignited beliefs that there will be extended quantitative easing.

Quite encouraging for equity investors, earlier this morning, Federal Reserve Chairwoman Janet Yellen commented on monetary policy at a conference in Chicago. According to Yellen, there is a considerable slack in the economy and in the labor market, and she added that the Fed still had a long way to go to restore the economy to full health despite its decision to begin winding down its asset purchase program. Yallen said that this extraordinary commitment is still needed and will be for some time, adding that she believed this view was widely shared by her fellow policymakers at the Fed.

As it stands, the Fed has consistently reduced its asset purchases by $10 billion per month during its last three meeting. As a point of reference, the Fed was purchasing $85 billion of bonds each month at the end of 2013 and reduced the pace by $10 billion to $75 billion per month in January 2014. The Fed further reduced its bond purchases by $10 billion to $65 billion per month in February 2014 and finally just announced another $10 billion reduction to $55 billion per month beginning in April 2014. However, now it is very likely that the $55 billion per month will stand for the short term.

Perhaps not very encouraging today, but still not significant enough to derail the stock gains posted so far was that a gauge of Chicago-area businesses unexpectedly took a sharp drop in March, hitting the lowest level since August. The Chicago Purchasing Managers' Index came in at 55.9, lower than the Street's consensus estimate of 60.1, decreasing from the prior reading of 59.8. The main drivers of the decline were employment and new orders. The employment category plunged to 50, now sitting on the line between expanding and contracting this month from 59.3 last month, while the new orders sector tumbled to 63.6 from 58.8. While the result was certainly not good, it only represents manufacturing activity in the Midwest. Tomorrow we'll get a much broader barometer of manufacturing activity, which is the ISM's Purchasing Managers' index (PMI). At the moment the expectation is that PMI will improve from 54.0 to 53.2, which is moving deeper into expansion territory.

In all, the clear driver for today's market action has been the belief that the Fed's asset purchases will remain at the $55 billion per month level for some time.  The rest of the week should be quite eventful with a slew of economic data points including ISM index, ADP employment, and the official government's jobs data; stay tuned.

No-Win for Gold
By David Urani

Gold prices are down almost 10% in the past couple of weeks as investors are picking up increasing appetite for risk rather than safety. Of course, the market is up today largely on bullish statements from Janet Yellen which makes today's further 0.6% move down in gold pretty interesting. In particular Yellen pointed out that inflation levels are a serious concern, and are currently below target meaning ongoing need for accommodation; usually that would be a bullish sign for gold. However, investors seem more inclined to chase risk and if that means unloading some gold then so be it. The Russell 2000, an index of smaller more risky stocks, is up 1.8% today; more than twice the increase of the Dow.

Corn Planting to Slow

Corn futures prices are up 1.7% on the day, breaking past $500 once again in the wake of a bullish USDA report. Corn stockpiles are actually reported to be up 30% year over year as of March 1 to 7.01 billion bushels. That comes as a result of a big boost in planting following the drought in the prior year that dented inventories. However, the fact that inventories are so high now means that farmers have lowered their plans for planting. In fact farmers now expect to plant 91.7 million acres, down from 95.4 million last year and also below the 93.0 million consensus estimate.

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