Bond Traders Aren't Buying Fedspeak Anymore

Not even Alan Greenspan, it seems, can have it both ways.

As has been the recent pattern, equity and bond traders had opposing reactions to Tuesday's announcement from the Federal Reserve. The stock market rejoiced at the Fed's intent to keep rates low "for a considerable period." The Treasury market questioned the wisdom of the Fed's strategy.

Modestly higher prior to the Fed's announcement at 2:15 p.m. EDT, major stock proxies soared thereafter. The Dow Jones Industrial Average closed up 1.2% to 9567.34, the S&P 500 gained 1.4% to 1029.32 and the Nasdaq Composite jumped 2.2% to 1887.26, a hair below its recent Sept. 8 closing high of 1888.62.

At 1.4 billion shares on the Big Board and 1.8 billion over the counter, volume was up noticeably from Monday's levels while breadth favored advancers by better than 2-to-1 in both venues.

As expected, the Federal Open Market Committee left the fed funds rate at a 45-year low of 1%. Officially, the Fed remains of the belief "that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal." However, the committee's statement was titled more toward economic weakness than some traders expected, especially given recent economic data and raised growth estimates by many economists.

Tuesday's statement was nearly identical with the one issued on Aug. 12. The only substantial difference was the FOMC's acknowledgement that the "labor market has been weakening" vs. being "mixed" in August.

Equity traders were able to look beyond the Fed's heightened concerns about labor markets and/or took solace in the notion that the central bank remains unlikely to tighten any time soon, given that backdrop.

Positive comments from Qualcomm (QCOM - Cramer's Take - Stockpickr) and strength in Nortel Networks (NT - Cramer's Take - Stockpickr) and AOL Time Warner (AOL - Cramer's Take - Stockpickr) lent further strength to shares, which seem to be in a "all news is good news" mode these days.