Stocks slipped on Wednesday, ending the Dow's five-day winning streak, as uncertainty again gripped Wall Street and threatened to derail the rally.
Investors couldn't agree what commentary from the Fed actually meant, when they said inflation was too low.
Some investors found it bullish, speculating the central bank was edging closer to pumping hundreds of billions of new dollars into the economy.
However, others found it bearish, reasoning it meant the economy was in much worse shape than people think.
"The Fed's comments were a double-edged sword. On one hand, they're concerned about the economy, but on the other hand they might do something stimulative. Stocks could go either way," says Thomas Villalta, portfolio manager for Jones Villalta Asset Management in a Reuters interview.
How should you position now?
We’re almost looking at a paradox, says Karen Finerman. The Fed wants to engineer inflation and yet we have a robust bond market. I don’t think those two things can co-exist like that for any period of time. Something’s got to give.
Also, the Fed outlook was not very encouraging, reminds Joe Terranova. That makes me question how resilient earnings are going to be during the next earnings season. We may not see a continued appreciation in the overall equities market.
However, if we’re looking at more inflation I’d want to rotate some capital out of gold and get ample exposure to energy and ag, Terranova counsels.
Out of all the moves on Wednesday I think what happened in the gold market is particularly important, says Brian Kelly. It hit new highs. It seems all commodities that are dollar based are moving higher. These inflation expectations are a big change in the market even from a week ago. All the action suggests investors expect the dollar is going much, much lower.
Remember, gold is a great trade when it’s going higher but when it reverses look out below, reminds Guy Adami. I'm fearful of that day.
MARKET BUZZKILL: FINANCIALS
Financials struggled on Wednesday after Deutsche Bank cut estimates on Goldman Sachs and Morgan Stanley . Also Jefferies reported weaker than expected results. The common thread here was a miserable slowdown in financials, explains host Melissa Lee.