Despite a pick-up in demand for higher risk assets and higher Asian equity markets, U.S. stock indices are predicting a flat to lower opening. Traders seem to be taking a cautious approach before the release of this morning’s U.S. GDP, Chicago PMI, consumer confidence and existing home sales reports.

Treasury markets are trading higher this morning. Investors appear to be anticipating U.S. economic reports to come out lower than expected. This will keep the pressure on the Fed to keep interest rates down.

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Today, Fed Chairman Bernanke will continue his testimony before the House Financial Services Committee. Yesterday he said the U.S. economic recovery has been “nascent” and requires low interest rates to help it sustain growth. He also said that low employment and subdued inflation allow the FOMC to keep downside pressure on interest rates.

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U.S. stock indices are trading flat this morning ahead of the U.S. opening. Investors seem reluctant to take a side ahead of today’s testimony by Fed Chairman Bernanke. Today’s emphasis will be on jobs and the Fed’s exit strategy. Bernanke may be asked to explain how the Fed plans to withdraw stimulus and raise interest rates without shocking the financial markets. Dovish comments by Bernanke are likely to decrease demand for higher risk assets while putting pressure on equities. Hawkish comments, or hints at a rate hike this year could also trigger the start of a sizeable correction. The only thing investors can count on today is volatility.

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