Dr. Bernanke Speaks, Markets Don’t Listen

 
Markets and index ETFs finished flat yesterday as Dr. Bernanke’s new “Operation Twist” failed to push investors into the green. The SPDR S&P 500 ETF (NYSEARCA:SPY) lost .16%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) lost .08%, the iShares Russell 2000 Index ETF (NYSEARCA:IWM) lost .15%, while the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) was the only “positive” index ETF yesterday with a measly .08% increase.
 
Dr. Bernanke’s new and improved (?) “Operation Twist,” which he plans to extend through the end of the year, did little to markets yesterday, as investors were seemingly hoping for more dramatic Fed intervention. Dramatic was definitely not the word for the Fed’s actions yesterday, as Dr. Ben outlined plans to sell short term bonds and buy longer term bonds in the 20-30 year range at the end of this month, with the hope of lowering interest rates. Although the extension of “Operation Twist” will likely stimulate the anemic economy to some extent, anything short of a QE3 would likely not have satisfied any of the “Bernanke-stimulus-addicted” trader.
 
Some real relief from across the pond did little to spur the bulls either, as Greece has FINALLY formed a coalition government consisting of the New Democracy Party, the Democratic Left Party, and the socialist Pasok Party. The new government is committed to staying in the Euro and has voiced its intentions to loosen tough austerity measures imposed by the EU earlier this year. The G-20 meeting in Los Cabos, Mexico has also produced “hopeful” words in regards to saving the European economy, however words, as always, only go so far, such as we’ve seen with Bernanke’s speech yesterday.
 
I am also wondering how far words will go with the likes of Italy and Spain on the horizon, especially since Greece is far from being seen in the rear view mirror. Hopefully Dr. Ben will have much more than a QE3 to shield the US economy from these potential firestorms.
 
Bottom Line:  All in all, markets flattened yesterday as hope for more Fed intervention rapidly dwindled away with the unveiling of Operation Twist Part II. Markets definitely seemed to be riding on the hope for more stimulus promises after today’s FOMC statement, and although the Fed appears to be mindful of the sluggish recovery, the Fed has still held out on a QE3 for now. Meanwhile, investors and policymakers alike continue to wait as the European saga continues to develop.
 
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