Don’t you love it? The Fed throws a wet blanket on the good economic data recently and openly frets about the damage to the U.S. economy from the European financial crisis. Wouldn’t you expect the stock market to go down?
Nope, it was down about 50 points at the announcement but then closed up 85 points. The reason for this irrational behavior is that the Fed said they would likely keep interest rates low until 2014, instead of mid-2013. More importantly, Chairman Bernanke strongly hinted that QE3 is always an option.
Like a street junkie spying their next hit, the market then got overly-excited and bid up the prices.