The Fed announced that it would expand Operation Twist by $267 billion through the end of the year.
"This continuation of the maturity extension program (Operation Twist) should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative," the Federal Open Market Committee said today in a statement at the conclusion of a two-day meeting in Washington.
The committee stated that economic growth has been "expanding moderately" this year but warned that "growth in employment has slowed in recent months, and the unemployment rate remains elevated."
Meanwhile, Greek formed a coalition government consisting of New Democracy, socialist party Pasok and the Democratic Party of the Left. Antonis Samaras, leader of the New Democracy party, was sworn in as prime minister earlier today.
"Greece has a government ... that is the message that we need to send abroad," said Evangelos Venizelos, leader of Pasok.
The embattled country had gone 223 days without an elected government. One of the new regime's first tasks will likely be renegotiating its bailout terms with the European Union and International Monetary Fund.
Stocks opened slightly lower awaiting the Fed's decision, but following its announcement the market took a sharp dive before heading back upward as many investors had hoped for QE3 rather than more "Twist."
There are two companies that are leading stocks downward today, The Procter & Gamble Co. (NYSE: PG) and Adobe Systems Inc. (Nasdaq: ADBE).
This is the second time in three months that P&G has lowered its outlook.
The Cincinnati-based conglomerate is the largest global consumer goods company and has been hurt because of that market exposure. PG derives 60% of its sales from developed markets such as Europe and the U.S. where growth has been stunted. P&G has seen price cuts in emerging markets.
"We have seen sequential deterioration in the rates of market growth in both the U.S. and Europe, and there has been a slowdown in the rate of market growth in China," McDonald said.
Proctor & Gamble also cited a stronger dollar and higher commodity costs as other factors weighing on the company's success.
McDonald was forced to issue lower guidance for the fiscal fourth quarter and stated that the 2012/2013 fiscal year which begins on July 1 will not be any brighter.
He expects fourth quarter sales to grow at 2-3%, down from 4-5%, while the quarterly earnings target was dropped to 75-79 cents per share, down from 79-85 cents.
Shares of PG were down 3% as of noon.
Adobe Systems Inc. (NYSE: ADBE) reported lower-than-expected earnings after Tuesday's closing bell blaming the Eurozone crisis as a main factor. Adobe generates almost 30% of sales from Europe.
For the second quarter Adobe's earnings fell 2.4% to 45 cents a share compared to the range of 57-61 cents a share the company had projected in March.
For the third quarter, the software company forecasts adjusted earnings of 56 cents to 61 cents a share on revenue of $1.08 billion to $1.13 billion. Analysts polled by Reuters previously expected 61 cents and $1.13 billion, respectively.
For the full fiscal year, Adobe lowered its adjusted per-share earnings target to $2.40 to $2.46 from its prior forecast of $2.38 to $2.48 and expects lower revenue growth for the remainder of the year.
Adobe, the world's largest maker of graphic-design software, is in the midst of a transition from a licensing model to a subscription based service and this is forcing revenue to be deferred to future quarters.
"The problem with this strategy is that it will take Adobe around four years to generate the same level of revenues from a single subscriber that it would have earned through the sale of a single perpetual license," Nomura analyst Rick Sherlund told Reuters.
Shares of Adobe stock had slipped 4% as of noon.
The Dow Jones today was down 80 points or 0.6% and the S&P 500 was down 10 points or 0.75% immediately following the Fed's announcement.
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