The Fed Keeps Its Powder Dry for Now
Given the already-low rates on long-term securities, it's doubtful the extended Twist program will have much more than a symbolic effect on rates.
Most of the economic news this week was relatively benign and housing related, freeing markets to worry about the Federal Reserve and more monetary easing, credit downgrades, and a worldwide manufacturing economy that appears stuck in neutral.
The market started the week on a high note with better-than-expected homebuilder sentiment and the best record of housing permits since 2008. However, we think hope that the Fed would again juice markets with more easing was really driving the market sentiment. So when we got a mere extension of current programs and no concrete new initiative, markets sold off on Wednesday.
Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.