Brian Sozzi Thinks Stocks May Rally Tomorrow On Big Ben

Brian Sozzi of Wall Street Strategies is out with a research note on tomorrow's FOMC meeting, as well as press conference that Federal Reserve chairman Ben Bernanke will have after. Sozzi goes on to note that the Fed's view that inflation in commodity prices were "transitory" has been largely spot on. Oil is well off the April highs, although the consumer price index is a little hotter than the Fed would like. Sozzi says, "Additional evidence of transitory inflation could be found in the latest CPI and PPI measurements. Prices are still elevated compared to a year ago and are major headwind to U.S. consumers; there is a lag between when a General Mills GIS or a Kellogg K announce a price increase and when they appear at the store level. However, these price increases are arriving to market at a period of a more cautious consumer, so they may not stick entirely as trade-offs are made (private label, fewer quantities purchased)." Despite some of the concerns over inflation, Sozzi believes that the market could rally into tomorrow's meeting. "This time, stock prices (a favorite of Bernanke as rising prices induce the wealth effect) are under pressure and commodities have sold off, creating a different platform for Bernanke to speak about future Fed policy. In other words, there is the possibility that Bernanke has a Jackson Hole Moment: Part 2 and conveys a more dovish policy approach relative to April, basically signaling ever so coyly additional bond purchases." Sozzi is referring to the speech that Bernanke gave at Jackson Hole, WY that the Federal Reserve would do whatever is needed to get the economy going. The Fed then announced a $600 billion bond buying program known as "QE2," and stocks have soared since that speech at the end of August 2010.