Put your ear to the ground on Wall Street and you’ll likely hear about growing expectations of a late week rally, post Fed meeting.
The optimism stems in part from the decision to expand what was scheduled as a one day meeting to two-days to allow for a ‘fuller discussion’ of the ‘range of tools that could be used to provide additional monetary stimulus.’
Pros take rhetoric to mean Ben Bernanke is looking to launch Operation Twist in an effort to stimulate the economy and in the process send bulls off to the races.
But Fast trader Brian Kelly thinks those expectations may be misguided.
”Operation Twist means selling the short end of the curve which would be 2-year notes and buying 30-year notes,” he explains.
”Although the 30-year notes have come down in yield so have 2-year notes. If investors were really expecting Operation Twist – they’d be thinking 2 year rates would be a little high – and that’s not what we’re seeing in the bond market.”
As a result, Kelly thinks investors who are hoping the Fed gives the market a boost this week may be a little disappointed. ”The market hasn’t reacted as if Operation Twist is going to happen,” says Kelly.
The FOMC statement will be released around 2:15 PM ET on Wednesday.