The Federal Reserve Bank of Kansas City released its Beige Book Report detailing economic activity among the twelve Federal Reserve Districts across the country. The pace of economic activity was quite sluggish throughout much of the country. At the same time, there have been hawkish comments recently by several Fed governors. This leads us to the question of the possibility of a Fed rate increase on the horizon.

However, one must remember that hawkish talk is quite different from hawkish action. As I have said in my book, Follow the Fed to Investment Success, "watch what the Fed does not what it says."

The Fed has given no indication that an imminent raise in interest rates is forthcoming. There have simply been hawkish comments, which are an incredibly inexpensive means of maintaining its inflation-fighting credentials. However, every time market turmoil arises, the Fed adopts a more conciliatory tone.

The Dow Jones Industrial Average rose today by 187 points, a 1.41% rise. The NASDAQ rose by 32 points, or 1.28% and the vaunted S&P 500 Index by 22 points or 1.52%. The markets were relatively benign until the details emerged from the Federal Reserve's Beige Book.

The Beige Book is released eight times per year, and is the collective wisdom of the 12 different Fed Governors. The news was better than expected, and the 10-year treasury note, which was topping out at 5.25%, began to sink and investors re-focused on the equities market.

The details from the Beige Book report was just the music the equity investor wanted -- needed -- to hear. Capital goods orders were picking up and the job market was, indeed, stabilizing. To boot, the real symphony continued when the Fed indicated there was no upward pressure on wage prices, thus stemming one of the legs of inflation. Consumer spending appears to remain in a healthy pattern, with general retail sales up a surprising 1.6%, versus the expectations of 0.8%. The consumer is still in a position to sustain economic growth.

The indicators from the Federal Reserve basically put the "R -word": Recession, back into the closet.