Fed Bullish, Not Dovish

Earnings Wednesday were a tailwind for the market's afternoon rally. In addition to Boeing, Ingersoll Rand (IR Quote), Estee Lauder (EL Quote) and Eli Lilly(LLY Quote) enjoyed post-earnings rallies.

After the closing bell, Google(GOOG Quote) reported its much-awaited results. The report was strong, but revenue was slightly disappointing to traders who sent shares down in after-hours trading. Separately, Dell (DELL Quote) shares were little changed on the post-close news founder Michael Dell is returning as CEO.

Traders expected the FOMC statement to take a more hawkish tone given the stronger-than-expected growth in the fourth quarter and recent evidence of rising wage pressures. Earlier Wednesday, the government reported 3.5% fourth-quarter GDP growth despite a still-large drag from housing-market weakness.

Indeed, the Fed did get more hawkish when it comes to its take on growth, but its reductive language on the inflation threat was enough to give the bulls the upper hand and put rate-hike fears on the back burner ... at least until the next data point.

In the fed funds futures market, odds of a rate change of any kind are now nil into the fall, according to Miller Tabak. By year-end, odds are 65% the Fed will cut the fed funds rate at least 25 basis points.

"This is about as good a disposition as central bankers are constitutionally permitted," says Joe Brusuelas, chief economist at IDEAglobal.