The FOMC is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly. ‘Significantly’ is so subjective when you own a depreciating asset like a house, mortgaged to the hilt and are still unemployed. Let’s hope whatever Bernanke and Co. have up their sleeve will have more of an market impact that the BOJ’s foray in easing monetary policy over night.

Last week, the market backed off from resistance at SPY 113 and the upward momentum from July was stopped dead in its tracks. Economic conditions in China are starting to weaken and that weighed on the market. Conditions in the US are also deteriorating. Back-to-back initial jobless claims numbers were much higher than expected. The four-week moving average is on the rise and that does not bode well for August’s employment report. The Fed lowered its GDP forecast for 2010. In its FOMC statement last week it reiterated that challenging conditions lie ahead.

It seems that s investors have adopted positions against the EUR not out of conviction about Europe’s economics but instead as a way to hedge bullish stock and other positions. Technically, the EUR would weaken and the dollar would strengthen if global stocks plummet. Last Wed. we witnessed that very scenario. Now that the EUR has dropped three big figures and no momentum to carry on the slide, we sit and wait again? Do we drown out all the noise around us and keep to our convictions? Even the Euro’s GDP numbers this morning has failed to ignite any appetite thus far.

The Federal Open Market Committee (FOMC) has decided to reinvest the proceeds from maturing securities acquired through its $1.25 trillion mortgage-backed security (MBS) purchase program. The proceeds won’t be invested in short-term, but in long-term Treasuries.
Federal Reserve (Fed) Chairman Bernanke has long argued that the MBS program constituted credit easing, not quantitative easing. Credit easing, the argument goes, ought to support the functioning and liquidity in the housing market.

It seemed the market was generally pleased with yesterday's FOMC statement, as the S&P 500 rallied back from its early lows and closed above the 1120 level for the 7th straight day. But after thinking about it overnight, it seems investors have reached a difference conclusion this morning, and view the Fed's statement as more worrisome.