Daily Market Color April 27, 2016Traders Remain Cautious Ahead of Fed Decision US stocks pared early losses while Treasuries are rallying across the curve as markets trade with a slight risk off bias ahead of today’s Fed announcement. Since there is no accompanying press conference from Fed Chair Yellen and no updated Fed rate projections being published, traders and economists will rely heavily on the wording of the statement for visibility into any change in the Fed’s thinking. Only modest adjustments to the dovish March statement are expected, but any indication that the Fed could tighten monetary policy in the near term could have a significant impact on markets, as traders have largely discounted such a move. After today’s meeting, the Fed next meets on June 14-15. The Wall Street Journal’s Jon Hilsenrath also believes today’s statement will be a non-event. In a WSJ article published today, he said that despite the recent improvement in financial conditions, it would be premature for the Fed to signal a willingness to raise rates in the near term. Hilsenrath’s rationale is that one of the main reasons for the recent improvement in financial conditions is the Fed’s stated cautious approach to raising rates. If the Fed were to indicate a change in stance, markets would potentially panic and the nascent progress could abruptly reverse course. In terms of economic data, the Commerce Department said the US trade deficit unexpectedly declined last month to the lowest level in over a year. Both imports and exports fell to multiyear lows, with imports and exports falling 4.3% and 1.1%, respectively. A separate report showed US pending home sales increased sharply in March, exceeding analysts’ expectations and sending a somewhat conflicting signal to other recent weaker housing data. Disappointing earnings from some of the world’s biggest tech names also weighed on markets after poor results from Apple, Google and Twitter, among others. Both the Dow and S&P 500 are trading fairly closed to unchanged on the day, while the tech-heavy NASDAQ is down nearly 1%. Treasury yields and swap rates are 1-4 bps lower across all major maturities, and WTI crude is up close to $45 per barrel, a 2% gain on the day / over 20% gain year-to-date.