Midday Update: Who’s Afraid Of The Big Bad Fed?

Philly Fed President Charles Plosser’s hawkish remarks Tuesday were quickly forgotten as the major indices rallied ahead of the release of the Federal Reserve Open Market Committee minutes at 2p.m.

Investors expected Madame Fed Chair Janet Yellen and other FOMC members to counter Plosser’s call for a sooner-than-expected Interest rate hike with dovish statements about disappointing employment and the need for monetary accommodation.

Econ Calendar: "Unending Chorus of Doves": 1130ET: Yellen; 1330: Kockerlakota; 1400: $FED Mins. $SPY http://stks.co/b0a5d

— See It Market (@seeitmarket) May. 21 at 07:34 AM

NY $FED‘s Dudley: “Many middle-skilled workers displaced during the recession are likely to find that their old jobs will never come back”

— Andrew Kassen (@andrewunknown) May. 21 at 10:08 AM

The S&P 500, Dow and Nasdaq were all in the green Wednesday. However, small cap stocks fell into the red, causing some on StockTwits.com to doubt the broader rally was sustainable. The iShares Russell 2000, $IWM, was the most discussed ticker on StockTwits by noon. It edged lower by noon.

Bulls you don't want to see $RUT constantly flirting with 1094 with lower highs; very important generational TL support $IWM $SPY $QQQ

— Matt (@BetaBouncer) May. 21 at 09:11 AM

Caution. Small caps again negative for day. $SPX $SPY $IWM $RUT Fed minutes release at 2 pm ET.

— David Durand (@SunAndStorm) May. 21 at 08:59 AM

Small caps are considered a harbinger by many for broader market performance. The theory is that when risk appetites shrink and concern for the greater market environment grows, investors will first choose to sell small cap stocks that are more dependent on growth. Then they will move into large, established companies more likely to weather an economic slowdown. However, if sentiment continues to deteriorate, investors might move out of stocks altogether.

Others on StockTwits said that, no matter what was said in the FOMC minutes, it would become clear that the Fed would not deviate from scaling back stimulus. And that news could spook investors with Plosser’s warning in the back of their minds.

$SPY big money is not stupid enough to buy stawks here into Fed tightening at ATH. this is a naked short setup.

— _flipper_ (@_flipper_) May. 21 at 08:52 AM

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