Wall Street Greek: FOMC Policy Statement Moved Shares Higher

The Fed's non-action provided relief to worried traders Tuesday, driving a rally to the close.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

(Tickers: NYSE: FRE, NYSE: FNM, NYSE: BAC, NYSE: WFC, NYSE: GS, NYSE: JPM, NYSE: C, NYSE: MS, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD)

FOMC Policy Statement

The Federal Reserve's Federal Open Market Committee (FOMC) published its latest policy statement in the afternoon Tuesday. The market reaction of relief was almost immediate. Ever since the misunderstood move by the Fed to bring discount window activity back to normal, traders have unfortunately driven a fear trade home. Today their fears were proved unwarranted and the market enjoyed a late afternoon rally on Fed reassurance.

The key points were:

Economic activity continues to strengthen
Labor Market is stabilized
Household spending expanding at moderate rate
Business spending on equipment and software is up significantly
Financial market conditions remain supportive of economic growth

Negative notations included:

High unemployment
Modest income growth
Low housing wealth
Tight credit
Investment in nonresidential structures declining
Housing starts flat at a depressed level
Employers reluctant to add to payrolls
Bank lending continues to contract

The Fed's Conclusion Therefore:

"The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time."

So the FOMC maintained rates at their lowest possible mark, with the target for the fed funds rate between 0 and 1/4 percent. The Fed continues to expect low resource utilization and low inflation to warrant these exceptionally low rate levels for an extended period of time. The Fed will however stop purchasing agency mortgage backed securities and other agency backed debt at the conclusion of the month, as previously forewarned. Also, the Fed said the last remaining special liquidity facility, the Term Asset-Backed Securities Loan Facility, will be closing over the next few months as well. The vote was nearly unanimous, with only Thomas Hoenig disagreeing with the wording "exceptionally low rates for an extended period of time" again, stating that it might drive another bubble...

Another Fed non-event? Nada! The market turned on a dime and headed higher toward the close as a result of the news. The Dow Jones Industrials ended the day up 0.41% on a marked move higher post the FOMC release.

Editor's Note: The day's earnings reports included 4Kids Entertainment (NYSE: KDE), A.D.A.M., Inc. (Nasdaq: ADAM), AAR Corp. (NYSE: AIR), ADVENTRX Pharmaceuticals (AMEX: ANX), Akorn, Inc. (Nasdaq: AKRX), American Dairy (NYSE: ADY), Anika Therapeutics (Nasdaq: ANIK), Applied Energetics (Nasdaq: AERG), Arbinet (Nasdaq: ARBX), ARIAD Pharmaceuticals (Nasdaq: ARIA), Ascent Solar Technologies (Nasdaq: ASTI), Astro-Med (Nasdaq: ALOT), Athenahealth (Nasdaq: ATHN), Avatar Holdings (Nasdaq: AVTR), AVI BioPharma (Nasdaq: AVII), Bovie Medical (AMEX: BVX), Cardium Therapeutics (AMEX: CXM), China Finance Online (Nasdaq: JRJC), China Fire & Security Group (Nasdaq: CFSG), China Nuokang (Nasdaq: NKBP), CIT Group (NYSE: CIT), CKX, Inc. (Nasdaq: CKXE), Cloud Peak Energy (NYSE: CLD), Communications Systems (Nasdaq: JCS), Competitive Technologies (AMEX: CTT), Connecticut Water Service (Nasdaq: CTWS), Deutsche Bank (NYSE: DB), Discover Financial (NYSE: DFS), Dominion Resources (NYSE: DOM), DSW, Inc. (NYSE: DSW), DXP Enterprises (Nasdaq: DXPE), Dynavax (Nasdaq: DVAX), Emdeon Inc. (NYSE: EM), eOn Communications (Nasdaq: EONC), EV Energy Partners (Nasdaq: EVEP), Ever-Glory International Group (AMEX: EVK), FactSet (NYSE: FDS), Federal Agricultural Mortgage (NYSE: AGM), Focus Media (Nasdaq: FMCN), FX Energy (Nasdaq: FXEN), General Steel (NYSE: GSI), Harvest Natural Resources (NYSE: HNR), Intersections (Nasdaq: INTX), Ivanhoe Energy (Nasdaq: IVAN), KongZhong (Nasdaq: KONG), Lightbridge (Nasdaq: LTBR), Majesco Entertainment (Nasdaq: COOL), MDS Inc. (NYSE: MDZ), Molecular Insight Pharmaceuticals (Nasdaq: MIPI), Old Second Bancorp (Nasdaq: OSBC), Outdoor Channel (Nasdaq: OUTD), Pacific Office Properties (AMEX: PCE), PMC Commercial (AMEX: PCC), Retail Ventures (NYSE: RVI), Retalix Ltd. (Nasdaq: RTLX), Rock of Ages (Nasdaq: ROAC), rue21, inc. (NYSE: RUE), ShengdaTech (Nasdaq: SDTH), Simcere Pharmaceutical (NYSE: SCR), TBS International (Nasdaq: TBSI), TerreStar Corporation (Nasdaq: TSTR), Tix Corporation (Nasdaq: TIXC), Trimeris (Nasdaq: TRMS), Universal Insurance (AMEX: UVE), ValueVision (Nasdaq: VVTV), Vista Gold (AMEX: VGZ), West Marine (Nasdaq: WMAR) and X Rite (Nasdaq: XRIT).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.