Credit: Shutterstock photoThe stock market went flat after the Federal Reserve said Wednesday it would keep stimulating the economy by buying mortgage-backed securities -- QE3 -- and long-term Treasuries -- Operation Twist -- while keeping the target interest rates near zero through mid-2015.
Its policy statement had little new. The Fed has said it will buy $85 billion in MBS and government debt each month through year's end to "put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative." The Fed noted that unemployment remains too high, business investment has slowed and that near-term inflation would likely be lower than its 2% target rate.
In afternoon trade, SPDR S&P 500 ( SPY ) eased 0.02% to 141.39. It appears to have found support at its August lows. It's fallen 4% from its four-year high. Corrections of 10% or less are considered normal pullbacks during uptrends.
PowerShares QQQ ( QQQ ), tracking the 100 largest nonfinancial stocks on the Nasdaq, ticked up 0.02% to 65.40. It has fallen to its key 200-day moving average -- a major level watched by traders. A break below this line would be very bearish.
SPDR Dow Jones Industrial Average ( DIA ) picked up 0.03% to 130.78. It's fallen close to its 200-day line also. But it's only corrected 4% from its 52-week high, which is considered a normal pullback.
IShares MSCI EAFE Index ( EFA ), tracking developed foreign markets, rose 0.30% to 53.51. It's holding above its 50-day line and looks bullish.
IShares MSCI Emerging Markets Index ( EEM ) added 0.51% to 41.25. It's also above its 50-day line, which means its uptrend remains in tact.
The Fed's announcement was a nonevent, and the market has already priced in expectations of very aggressive monetary policy, said Alec Young, global equity strategist at S&P Capital IQ. Investors are more concerned about what Congress is going to do about the looming "fiscal cliff," in which budget cuts and tax increases would go into effect next year.
"With the prospects of the fiscal cliff, the Fed is not going to waver in its easy money policies," said Anthony Danaher, president of Guild Investment Management in Los Angeles.
The equity and commodity markets are bracing for a potential change in the White House with the election two weeks away, he said.
"Regardless of the election results, we see exceptionally low rates and further expansion of the Fed's balance sheet until it demonstrates positive results in the labor market," Danaher said. "The Fed is not alone. All major central banks are in the same accommodative, balance sheet expanding mode."
"I think they are on the ball and doing the right thing by taking a defensive stance in regards to economic growth," said Ethan Anderson, chief investment strategist at C-PAS, a registered investment advisor in Grand Rapids, Mich. "They had been warning that economic growth, while improving, is not strong enough, and we are seeing evidence of that this earnings season."
The Federal Open Market Committee will meet again on Dec. 11 and 12. There's no meeting in November.
"Unless things take a turn for the worse, Fed policy is unlikely to change at the December meeting, and QE ad infinitum will continue with low rates expected through at least mid-2015," said Jason Schenker, president of Prestige Economics in Austin, Texas.
Follow Trang Ho on Twitter @TrangHoETFs .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
