A good week
It was a good week for a change in the equity markets. The Dow posted four straight gaining sessions. The weekly close was the best since July 5th. The same can't quite be said for the other key equity measures. Although the S&P 500, the Nasdaq composite and the Russell 2000 all rose sharply this Friday, they have further to go to recuperate lost points.

It is too soon to tell whether sentiment has shifted even though equity markets may have bottomed in mid-July (or early August in the case of the Nasdaq composite). Even though it appears that investors are putting their toes in the water, they have yet to dive in. A few more positive economic numbers coupled with an end to the accounting saga would go a long way in making investors less worried about further market deterioration and more willing to remember that long-term rewards come with risk in the stock market.

Ease unlikely on Tuesday, but still possible later this year
Over the past few weeks, Treasury market players have been reacting to mostly weaker-than-expected economic figures. Many economists have revised their forecasts to show a slower recovery in the second half of this year. A few Wall Street firms have also called for aggressive Fed cuts this year ranging from 50 basis points at Tuesday's meeting to 75 basis points over the next six months. The Treasury market has been rallying sharply in response. The yield on the 2-year bond hit a lifetime low of 1.89 percent this past Monday. Even at Friday's close of 2.05 percent, the yield is down dramatically from only three weeks ago.

A combination of articles from the Wall Street Journal, the Washington Post and Market News International helped to dispel the belief that the Fed stands ready to lower rates on Tuesday. Nevertheless, a majority of market players continue to believe that the Fed will likely lower its federal funds rate target within the next few months. Market players might change their views if economic indicators come in on the positive side in the next few weeks.