Market Preview: Silent Fed

NEW YORK (TheStreet) -- Evidently Wall Street was expecting an early Christmas present from Ben Bernanke & Co.

Heading into this final one-day meeting of 2011, the drumbeat for more quantitative easing from the Federal Reserve wasn't very loud but apparently investors wanted to see some groundwork laid. If not that, they may have been expecting more color on the shift the central bank has been telegraphing toward a more explicit communications policy. At the very least, there was anticipation for a clear and unequivocal acknowledgment that the economic data is really and truly getting better.

Instead, they got almost nothing, a mere tweak of the policy statement, and stocks slowly sold off through the final two hours of Tuesday's session.

Economic research firm Capital Economics summed it up by saying the statement was "perhaps not as cheery as some might have been hoping for."

And a lack of cheeriness is always disappointing this time of year.

Not to worry though, QE3 is still a very real possibility, Capital Economics said, possibly arriving as soon as next month.

"We suspect that we won't have to wait much longer, however, with QE3 coming in the first half of 2012, possibly even as soon as the next FOMC meeting in late January," the firm wrote. "Despite signs that economic growth might be picking up a little, many Fed officials still feel that the elevated unemployment rate warrants further action."

Capital Economics also noted that it makes more sense for the Fed to save big news for a two-day meeting so that Bernanke can meet the press and explain the rationale for the central bank's decisions, so let the expectations start rising for the conclusion of 2012's first meeting on Jan. 24-25.

It's an odd week for the markets with very little scheduled news, and the lingering doubts about Europe are always lurking at the edge of any rally. The comments from German Chancellor Angela Merkel that bruised sentiment on Tuesday weren't really new but they were enough to spook traders. Gary Thayer, chief macro strategist at Wells Fargo Advisors, looked back to 2008 to explain the crossroads the market's psyche seems to be at right now.

"The history of the 2008 financial crisis suggests that policy makers only need to restore confidence, not resolve all problems, in order to stabilize the financial markets," Thayer wrote. "Recent market action suggests we are not at that point yet in the European crisis. However we may be getting closer. In the meantime, the global economy remains at risk because of problems in Europe."

That may be it in a nutshell. It's not that Europe's leaders need to account for every possible eventuality of the region's sovereign debt crisis but they still do need to sell the world on the idea that they can handle whatever comes their way.