Dow Turns NEGATIVE After Fed Statement, Losing 200 Points - Full Text Of FOMC Statement

UPDATE - DOW closes up 430 points.

The DOW is extremely volatile after the FOMC statement was released minutes ago, quickly shedding 200 points and trading down more than 60, before briefly turning positive again.

• Follow the action LIVE here

Full FOMC statement is below.  I have highlighted the section referring to a possible QE3.

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“Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up.

Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity. Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions. More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.” 

Update on Aug 9, 2011 at 4:14 PM by DailyBail

UPDATE - DOW closes up 430 points.

Comments

[DailyBail]

WASHINGTON (MarketWatch) -- The Federal Reserve on Tuesday put more clarity on what it means to hold interest rates low for an "extended period" of time, saying for the first time that it means "at least through mid-2013." The action brought strong dissent, as regional Fed presidents Richard Fisher, Narayana Kocherlakota and Charles Plosser objected to the new terminology. Federal Reserve Chairman Ben Bernanke led seven voters in favor of the decision, which came as the central bank said it expects a slower pace of recovery than what it anticipated during the last meeting in late June. The Fed also indicated that it "discussed the range of policy tools available to promote a strong economic outlook recovery in a context of price stability" and said it's prepared to employ the tools as appropriate. The Fed as expected held its target Fed funds rate between 0% and 0.25%.

http://www.marketwatch.com/story/fed-says-to-hold-rates-low-through-mid-2013-2011-08-09

[DailyBail]

Read it closely. Sounds like they are prepared to do QE3.

[john]

There is no F-ing way that the market just 'suddenly' shot up and closed at about 420 without intervention.

[DailyBail]

I agree John. The FED probably did some buying. But it was also a short squeeze trap for day traders. When the market swooned and went negative many traders went short. Then when it turned positive they were forced to cover their shorts (which means buying) into a ramped close. Day traders don't hold positions overnight, so they had no choice but to buy and close out their short positions, regardless of price. This is generally what happens when you see a straight line vertical ramp in indexes. My guess would be the PPT stepped in only briefly to buy futures when things were negative in order to support the markets. The rest took care of itself.

I have worked on Wall Street and been watching markets and trading for 23 years now. I have seen this type of action many times before on volatile days.

[john]

http://www.zerohedge.com/news/price-stability-10-year-retraces-almost-entire-intraday-swing-sp-surges-over-60-points-minutes

[DailyBail]

Also, by signaling that they would hold rates low for the next 2 years, the FED forced people into riskier assets automatically. So stocks benefited.

[john]

Death of a carbon salesman: Chicago Climate Exchange

http://wattsupwiththat.com/2011/08/09/death-of-a-carbon-salesman-chicago-climate-exchange/

[snip]

CHICAGO—IntercontinentalExchange Inc. told traders Friday that it would shut down its U.S. emissions derivatives platform, a year after acquiring its parent only to suffer sparse trading as the prospects of a federal carbon-reduction plan remain dim.


The money-losing Chicago Climate Futures Exchange venture will continue operating through the first quarter of 2012 before closing, exchange officials said in a notice. ICE will then list over-the-counter emissions contracts mirroring products listed on the platform.

[john]

http://www.environmentalleader.com/2011/08/09/ice-adds-21-emissions-contracts-to-replace-futures-exchange/

ICE Adds 21 Emissions Contracts to Replace Futures Exchange

[snip]

Intercontinental Exchange has announced plans to launch 21 over-the-counter North American emissions contracts.

The announcement follows on the heels of news that ICE will shut its emissions derivatives trading platform, Chicago Climate Futures Exchange, by the end of Q1 2012.

The new contracts will mirror products to be lost when the futures exchange closes, the Wall Street Journal reported. New products include derivatives linked to emissions reductions plans in California, Massachusetts, New Jersey and Connecticut, ICE said.

[john]

Reid Will Name Sens Murray, Baucus, Kerry To Debt Panel -Source

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201108091752dowjonesdjonline000384&title=reid-will-name-sens-murraybaucuskerry-to-debt-panelsource

[snip]

Senate Majority Leader Harry Reid (D., Nev.) will name Sens. Patty Murray (D., Wash.), Max Baucus (D., Mont.) and John Kerry (D., Mass.) to a panel of lawmakers created as part of last week’s deal to raise the debt ceiling, a Democratic official said.

Murray, a member of the Senate Democratic leadership team, will be named the co-chairman of the committee, the official said.

Note: Kerry and Murray supported CAP and TRADE.

flashback:

Kerry, Boxer: U.S. ‘Needs’ Cap-and-Trade on Carbon Emissions Even if Energy Costs Rise

http://www.cnsnews.com/node/45330

Democratic Sens. John Kerry and Barbara Boxer told CNSNews.com that the nation must adopt the Obama administration’s cap-and-trade proposal to reduce carbon emissions, even if it results in massive increases in gasoline and electricity prices.

When CNSNews.com asked the Massachusetts Democrat whether the country could afford cap-and-trade during the recession, Kerry responded, “Yes, yes, yes, and yes.” He added: “The cap and trade system is – in fact – going to help us kick our economy back into gear.


Here is what Murray said....

http://conservativeamericanvet.wordpress.com/2009/04/23/senator-patty-murray-response-to-my-carbon-taxing-letter/

Max doesn't read his bills either....

http://www.sfexaminer.com/blogs/beltway-confidential/max-baucus-author-obamacare-admits-he-never-read-his-own-bill

Lets see who the republicans put on the committee..................

[john]

Boehner names GOP members of super committee

http://news.yahoo.com/boehner-names-gop-members-super-debt-panel-152534432.html