The Fed has decided to keep interest rates unchanged and will
not begin to taper the $85 billion in asset purchases per
The news is no surprise to the market, but the statement
associated with the decision was enough to move everything from
stocks to bonds to currencies.
For the most part, today's statement from the Fed was
identical to the one released in September. They note that the
economy is growing at a moderate pace again today. One difference
is the reference to the weakness in the slowing of the housing
market. Even though the changes from last month it gave investors
a reason to take profits after a big rally in the short-term.
SPDR S&P 500 ETF (NYSE:
Stocks initially rallied after the announcement and then
headed south to hit new daily lows. SPY traded to the lowest
level of the week as investors decided it was better to sell
first and analyze later. Choppy action followed the sell-off with
some investors thinking the Fed announcement is as good as any
time to take profits. On the other side of the trade were
investors using the weakness to buy stocks at a discounted price.
Short-term more selling could be the case, but longer-term the
Fed continuing its monthly program is good for stocks.
SPDR Gold ETF (NYSE:
When the tapering begins it is perceived that the price of
gold will fall as the U.S. Dollar rises. With the Fed printing
less money it will result in less supply of greenbacks in the
market and thus a higher valuation for the currency. Gold and the
U.S. Dollar historically move inverse to each other. GLD fell
more than $2/share after the announcement as the U.S. Dollar rose
The Fed announcement should not have caused the metal to fall,
except GLD already rallied seven percent in the last two weeks.
This was most likely a case of buy the rumor, sell the news. Gold
did rebound after the initial bounce and was last trading off the
lows of the session.
The PowerShares U.S. Dollar Index Bullish ETF (
) had an intraday chart that was the opposite of GLD. The ETF
rallied after the announcement before pulling back in the last
hour of trading. The longer-term trend for UUP remains lower and
it would not be surprising to see new lows in the weeks
It is always interesting to see how different asset classes
react to news in the day and age of information overload. Often
times the initial move lasts a short period of time before the
real trend emerges. The next two days will be critical to the
next trend in the market and various asset classes.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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