Breakout

Fed tapers by another $10B as markets shrug

Jeff Macke
Breakout

To the surprise of very few, the Federal Reserve stayed the course with its Quantitative Easing taper plan today. Ignoring a weaker than expected GDP print of 0.1% earlier this morning the Fed basically said the economy is good enough to justify staying the course on its taper program.

Related: Fear the Taper: Why Fed’s bond buying must continue

As Yahoo Finance kingpin Aaron Task and I discuss in the in the attached video, in the context of generally improving economic news, the GDP report was easily dismissed as a one-off rather than the start of a darker trend.

The meat of the Fed’s statement is here:

“The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases.”

If the Fed keeps tapering at $10 billion per month QE won’t be off the table until the after the final meeting of the year in mid-December. If the Fed sticks with their plan, the current leg of QE will have had a two year run, though it’s obviously way too early to start planning farewell parties.

For investors the temptation to start counting down to the New Year is already growing after months of sawtooth action in 2014. For April the S&P 500 (^GSPC) finished almost exactly where it started despite several downside scares. The Nasdaq dropped more than 2% for the month as anything related to social media continues to get hammered. Today’s casualty, Twitter (TWTR) opened down 10% and stayed there for most of the day.

Related: 4 ways to fix what's broken at Twitter

Halfway through what was expected to be a volatile week stocks continue to trade as though determined to baffle the maximum number of traders and grind away profits. As the cold rain falls on Wall Street to end the first month of spring, investors and the Fed are both looking at the skies wondering when, or if, summer will arrive.

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