After the U.S. Federal Reserve announced yesterday (Wednesday) that the central bank would extend Operation Twist, the markets dipped then climbed back to finish basically flat for the day.
Today all three major indexes are down nearly 2% or more. The Dow Jones sunk more than 250 points, or 1.96% to 12,573.57. The S&P 500 fell 2.23% to 1,325.51.
So when will the fun begin, if ever, following this new dose of stimulus?
That's what Money Morning Executive Editor William Patalon III wanted to find out.
In his Private Briefing newsletter yesterday, he asked Money Morning Chief Investment Strategist Keith Fitz-Gerald what investors should expect following this latest Fed move.
Bill wanted to know three things about the second round of Operation Twist:
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Here's When to Expect an Operation Twist Market Rally
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Is the Fed's Operation Twist Just the Start of More Stimulus?
The Federal Open Market Committee (FOMC) ended its two-day policy meeting Wednesday announcing an extension of Operation Twist, the policy of swapping short-term Treasury securities in its reserve for bonds with a longer maturity.
The program, set to expire June 30, will now continue until year's end. During the next few months the Fed plans to buy some $267 billion worth of bonds.
In a press conference after the meeting, Federal Reserve Chairman Ben Bernanke indicated the Fed sees weaker times ahead. Its outlook has changed, and not for the better.
It was not what investors wanted or needed to hear.
The program, set to expire June 30, will now continue until year's end. During the next few months the Fed plans to buy some $267 billion worth of bonds.
In a press conference after the meeting, Federal Reserve Chairman Ben Bernanke indicated the Fed sees weaker times ahead. Its outlook has changed, and not for the better.
It was not what investors wanted or needed to hear.
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The Fed's Mixed Messages on QE3
Federal Reserve Chairman Ben Bernanke, speaking before the Joint Economic Committee Thursday morning, refused to hint at whether or not investors can expect another round of stimulus - either in QE3 or Operation Twist - to help the struggling U.S. economy.
Rep. Kevin Brady, R-TX, asked Bernanke to "look the market in the eye" and tell investors what to expect from the Fed. Bernanke refused to commit to a policy, but said the Fed could deliver an answer in the next couple of weeks.
Bernanke's comments indicated that the Fed would continue to monitor the U.S. economy as needed, but that no action like another round of quantitative easing was immediately necessary.
"The Committee reviews the size and composition of its securities holdings regularly and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery," Bernanke said in prepared remarks.
His non-committal comments contrasted those made a day before by other Fed members, including Vice Chair Janet Yellen and San Francisco Fed President John Williams, who indicated that more stimulus by the central bank is necessary to boost the U.S. economy.
"It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest," Yellen said Wednesday in a speech in Boston.
Also on Wednesday Federal Reserve Bank of Atlanta President Dennis Lockhart said another round of Operation Twist could be considered.
"There is capacity to do more," Lockhart in a speech in Florida. "It is certainly an option. I'm not going to speculate on what the FOMC will do."
Bernanke's remarks followed the market's best daily performance of 2012. The Dow surged 287 points on Wednesday, closing at 12,414.79. Despite the mixed Fed messages, markets started off well Thursday, with each index rising more than 1% after The Peoples Bank of China announced it would cut its deposit and lending rates 0.25%, marking its first cut since 2008.
Rep. Kevin Brady, R-TX, asked Bernanke to "look the market in the eye" and tell investors what to expect from the Fed. Bernanke refused to commit to a policy, but said the Fed could deliver an answer in the next couple of weeks.
Bernanke's comments indicated that the Fed would continue to monitor the U.S. economy as needed, but that no action like another round of quantitative easing was immediately necessary.
"The Committee reviews the size and composition of its securities holdings regularly and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery," Bernanke said in prepared remarks.
His non-committal comments contrasted those made a day before by other Fed members, including Vice Chair Janet Yellen and San Francisco Fed President John Williams, who indicated that more stimulus by the central bank is necessary to boost the U.S. economy.
"It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest," Yellen said Wednesday in a speech in Boston.
Also on Wednesday Federal Reserve Bank of Atlanta President Dennis Lockhart said another round of Operation Twist could be considered.
"There is capacity to do more," Lockhart in a speech in Florida. "It is certainly an option. I'm not going to speculate on what the FOMC will do."
Bernanke's remarks followed the market's best daily performance of 2012. The Dow surged 287 points on Wednesday, closing at 12,414.79. Despite the mixed Fed messages, markets started off well Thursday, with each index rising more than 1% after The Peoples Bank of China announced it would cut its deposit and lending rates 0.25%, marking its first cut since 2008.
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