NEW YORK (Reuters) - The Federal Reserve on Wednesday extended its monetary stimulus to an economic recovery that looks at risk of stalling, renewing its effort to depress borrowing costs by selling short-term bonds to buy longer-dated ones.
LARRY PERUZZI, SENIOR EQUITY TRADER, CABRERA CAPITAL MARKETS, BOSTON
”Operation Twist helped to negate the effect of the acknowledgement of the slowing employment picture and slowing spending.
“The further stimulus is positive. The last couple of rallies were on expectations that that was going to happen. The statement of the employment growth, while disappointing, I don’t think is surprising to anybody based on everything we’ve been seeing.”
TIM EVANS, ENERGY ANALYST FOR CITI FUTURES PERSPECTIVE IN NEW YORK
”There are still some oil market bulls out there but I‘m not one of them for now. They stumble from one event to the next hoping that policymakers will provide some relief. But they forget none of these will actually increase the consumption of crude oil.
”The oil market is very well supplied. Inventories are growing as supply is rising faster than demand.
”Prices have fallen a lot already so I‘m flat for the moment, rather than looking to sell, but the big downside risk remains is that this is not a repeat of 2011 but a repeat of 2008, with the euro zone crisis replacing the banking crisis.
“From a shorter-term trading or risk management position I don’t want to step in front of this, in case we are in a 2008 scenario. We fell $115 between July and December in 2008, the rocket parachute failed to open. It’s dangerous trying to scale back into this market.”
MARK ANDERLE, TRADER FOR TAC ENERGY, DALLAS, TEXAS “Crude futures have been following the stock markets which have been strong in recent sessions in anticipation of the Fed move. Now that the Fed’s done it, we’re going through the ‘buy the rumor, sell the news,’ phase.”
ALLEN SINAI, CHIEF EXECUTIVE OFFICER AT DECISION ECONOMICS IN NEW YORK
“The Fed was more concerned about the economy than they have been and eased by extending Operation Twist. They appear to be holding more firepower in reserve in case things get worse. Markets have been anticipating easing, but markets were a little disappointed that the Fed wasn’t as dovish as it could have been. Markets were hoping for a more dovish and unified statement.”
“I think that the oil traders who are dipping their toe in the financial markets are missing the fact that this is a pretty big extension of the ”twist“: $267 billion. We could be seeing more emotion selling the market off than we do the hard-line macro guys. I would think that we could get plenty of bargain hunters once we see the seas calm.”
“The oil market didn’t respond positively to Fed’s extension of the Twist. People in oil and equities markets were looking for more easing to provide price support, and didn’t get it. Oil has dropped to an eight month low and is staying put there for now. We’ll have to see whether the extension of twist is enough to hold oil around current levels.”
TONY VOLPON, HEAD OF EMERGING MARKETS RESEARCH AMERICAS, NOMURAL SECURITIES INTERNATIONAL, NEW YORK
”They are disappointing the markets. The Twist amount, while no QE, was sort of at the low end of what people were expecting. So there is a bit of a risk-off move here, in equities, currencies, everything. But before acting more forcefully, I think people will wait for the press conference. The statement does say they are willing to do more. Hopefully we’ll get more information at the news conference and see how dovish they are really.
STEVE VAN ORDER, FIXED INCOME STRATEGIST, CALVERT INVESTMENT MANAGEMENT INC, BETHESDA, MARYLAND
“The Fed statement looks basically the same as April, but they extended Operation Twist until the end of the year. It was a tough call whether they would do anything and they didn’t do anything particularly exciting. It’s a plain vanilla extension of Operation Twist.”
FRED DICKSON, CHIEF MARKET STRATEGIST, D.A. DAVIDSON & CO. LAKE OSWEGO, OREGON
“The Fed extending Twist was expected. There may be some disappointment that the Fed didn’t provide any strong hints in terms of new policy announcements.”
MARK MARTIAK, SENIOR WEALTH STRATEGIST AT PREMIER/FIRST ALLIED SECURITIES IN NEW YORK
“I‘m surprised markets have taken a slight turn downward, but markets don’t feel good that there is extended liquidity. Pumping liquidity into the system concerns the market over time.”
OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON, D.C.
“It is not as dovish as expected. The extension of Operation Twist to the end of the year had been expected. Above and beyond that, they did not signal they are ready for wholesale asset purchases, i.e. QE3. In that respect it is a little disappointing and therefore the euro has come off. The QE3 premium is starting to come off.”
JOHN CANALLY INVESTMENT STRATEGIST AND ECONOMIST FOR LPL FINANCIAL IN BOSTON
“Right in line with what we expected, a little twist plus. Twist and they will maybe do something if they think it is necessary but I guess QE3 was too much of a political risk and they wanted to keep their powder dry.”
(ON MARKET REACTION:) “There were a lot of guys out there with the finger on the sell button unless they saw balance sheet expansion and that is what you are getting.”
DAVID KEEBLE, GLOBAL HEAD OF INTEREST RATES STRATEGY, CREDIT AGRICOLE CORPORATE & INVESTMENT BANK, NEW YORK
“It’s very close to what the market expected regarding Operation Twist. However, the pace of Twist buying has already caused problems for the short end of the curve and I suspect that the two-year note will not like this. Overall, the equity market should be disappointed but will get over it and I would fade the rally in longer Treasuries.”
JOSEPH TREVISANI, CHIEF MARKET STRATEGIST, WORLDWIDE MARKETS, WOODCLIFF LAKE, NEW JERSEY
“The Fed move to extend the Operation Twist program is conservative and wary. The central bank is signaling its concern for the economic future, both American and European, without unduly damaging the present by weakening the dollar.”
STOCKS: U.S. stocks add to losses.
BONDS: U.S. 30-year Treasury bonds gained a point in price.
FOREX: Dollar gains versus euro.
Americas Economics and Markets Desk; +1-646 223-6300