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The Morning Hammer: Japan Gets Us All Warmed Up for the Fed


The Japanese Nikkei and Topix indices had a great night after the Bank of Japan made its monetary policy announcement.

The Bank did not go deeper into negative rates as had been rumored, but will instead focus on controlling rates and steepening the yield curve.

A steeper yield curve means bigger profits for financial institutions, so Japanese banks and insurers are ripping.

The yen is also rallying against major currencies.

The Bank said it will focus on buying ETF's that track the Topix rather than the Nikkei, which some traders expected.

Europe also woke up on the BoJ news, with a huge rally in financials.

The positivity is extending to the US, with SPX futures in positive territory.

Today could be a big day for us with the Fed rate decision (2:00 p.m.) and press conference (2:30 p.m.).

You can read my thoughts on the Fed here.

Markets appear to be braced for no rate change and a hawkish statement.

The anarchist in me actually hopes Barclays and BNP Paribas are correct in predicting the Fed will raise rates today, just to shake things up a bit and give us some more of the volatility we saw last week.

The permabear in me thinks there's a good chance the Fed doesn't hike and actually backs down its hawkish chatter a bit.

But I'm not going to roll the dice. I'm going to sit tight and wait for the dust to settle before committing to a view.

We have crude oil inventories at 10:30 a.m. ET. The American Petroleum reported a large -7.5 million drop in US inventories overnight.

Keep in mind that oil sold off hard after the past 2 weekly inventory reports, even though both were very bullish. It looks like traders are selling the rips ahead of the big OPEC meeting in Algiers.

JP Morgan increased its Apple (AAPL) iPhone production estimates based on channel checks. That's helping Apple a little bit.

Credit Suisse is out saying European bank are cheap based on dividend yields and relative valuation.

Fed day is obviously an anything goes day — especially with the BoJ in the mix — but I'd keep watching the usual suspects like the Russell 2000 and biotech (IBB).

Biotech has been a big upside outlier the past couple days on a very positive news flow (drug approvals, takeovers), and it's hard to break this market when biotech is doing well.