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Good Morning. The question of the day is whether or not the Federal Reserve Board will begin "talking taper" at this week's FOMC meeting. Although we will find out soon enough (it is a safe bet that Ben Bernanke will address the subject at his press conference which will be held at the end the Fed's two-day meeting on Wednesday), this won't keep traders around the globe from speculating on the issue of when and by how much the Fed will start cutting back on their stimulus programs. And this, in turn, is likely to keep markets volatile until we get the word from the Fed Chairman this week.

While there has been a fair amount of public discussion by Fed governors recently on the topic, so far at least we haven't heard anything official out of the FOMC. The bottom line is this has kept the market on pins and needles - and will likely continue to do so over the coming days.

However, if one steps back from the blinking screens for a moment, the idea that stocks have been moving up and down violently every time the subject is broached is sort of silly. Remember, there is absolutely zero discussion currently of the Fed raising rates. Bernanke's bunch has made it very clear that rates will continue to stay low for an "extended period." Heck, we're not even talking about the FOMC actually stopping the QE programs any time soon. No at this stage, traders are fretting over the idea of the Fed simply reducing the amount of stimulus it is providing to the economy each month.

Stocks rallied furiously on Thursday in response to a blog by the WSJ's well known Fed watcher, Jon Hilsenrath. Mr. Hilsenrath opined that the Fed Chairman is none to happy about the way the markets have reacted to the idea of QE tapering. (Recall that bond yields have spiked higher over the past month and that any further increase in rates could put a crimp in the economic recovery.) And since Hilsenrath is purported to be a public mouthpiece for Bernanke, traders now expect to hear dovish comments out of the FOMC this week.

We should remember that Ben Bernanke is one of the world's renowned experts on the Great Depression. And given that one of the big mistakes made back then was that government officials prematurely assumed everything was fine, Bernanke has made it clear over the past four years that he plans to err on the side of caution. In other words, the Fed isn't likely to pull the punch bowl too soon unless the economy is showing signs that it has finally has established "escape velocity" and can grow steadily and strongly without assistance from the Fed. In short, as long as inflation is low and unemployment is high, Bernanke is likely to continue to prime the pump with economic stimulus.

On the subject of the economic recovery, it should be obvious to anyone paying close attention that the economy is not exactly hitting on all cylinders at the present time. Sure, housing has perked up. And yes, we are starting to see some signs of improvement in the jobs market. But, the pace of economic recovery is anything but robust at the present time as we continue to see data come in on the disappointing side from time to time.

While I can easily be accused of oversimplifying the matter this morning, I'm going to suggest that the bond market may be getting ahead of itself at this stage and that the Fed isn't likely to say much of anything about raising rates or even when the FOMC might start to cut back (i.e. taper) on its stimulus efforts. So, while everyone else may be "talking taper" right now, the data hasn't convinced me that the Fed will be.

Publishing Note: I have an early meeting on Tuesday and will not publish morning report. Regular "State" reports will return on Wednesday.

Turning to this morning... In light of the fact that there were no negative developments over the weekend, traders have returned to their desks with a more positive view this morning. And with Japanese stocks rising for a second consecutive day and European bourses higher, U.S. futures are following suit in the early going.

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell...

Major Foreign Markets:
- Shanghai: -0.28%
- Hong Kong: +1.22%
- Japan: +2.73%
- Germany: +1.32%
- France: +1.70%
- Italy: +0.64%
- Spain: +1.19%
- London: +0.80%

Crude Oil Futures: +$0.76 to $98.61

Gold: -$2.80 to $1384.80

Dollar: higher against the yen, lower versus euro and pound

10-Year Bond Yield: Currently trading at 2.117%

Stock Futures Ahead of Open in U.S. (relative to fair value):
- S&P 500: +11.778
- Dow Jones Industrial Average: +106
- NASDAQ Composite: +26.52

Thought For The Day...

Only those who dare to fail greatly can ever achieve greatly. - Robert F. Kennedy

Positions in stocks mentioned: none

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