Trader Talk

Why The Fed Did Not Cause Stocks To Sink


The Fed was slightly more positive on the economy, noting that "conditions in financial markets have generally improved in recent months" and that "the pace of economic contraction is slowing."

A slight change in the inflation statement. They removed concerns about deflation, but did address those who are worried inflation will get out of control in the next months. They said "substantial resource slack is likely to dampen cost pressures"

Rates: to remain low "for an extended period".

So why are stocks lower in the first half hour after the statement? First, traders pointed to the fact that there was no increase in the purchases of Treasuries or mortgage backed securities. This has led to a rally in the dollar, and because U.S. stocks have been very dollar sensitive recently (particularly commodity stocks) the market has declined.

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