Going into Mr. Bernanke's testimony, most traders assumed the Fed was oriented toward easing. Today, Bernanke did not come off as dovish as some had expected ("We have seen some positive developments in the labor market") and so we saw a bond and commodity selloff, dollar rally, and a decline in commodity related stocks.
Other central banks are sending similar signals. Bank of England policymaker Martin Weale said the BOE does not have any reason to continue its quantitative easing program after it is completed in May. ECB insiders seems to be hopeful they will not need a third round of 3-year loans any time in the future.
One final question: if QE is less likely, and stocks like QE, why are all the major indices in positive territory? Why didn't stocks sell off as much? The short-term negative of no more QE or Operation Twist is offset by the stronger economy. And that is as it should be.
All of this, of course, will change if the global economy nosedives again. They will keep the spigots running, if they have to.
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