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Market Preview: The Fed's Stealth Bailout of Europe

Updated from 7:53 p.m. ET to include information about after-hours action involving Transocean and Juniper Networks.

NEW YORK ( TheStreet) -- It's safe to say the Federal Reserve didn't exactly wow Wall Street as the dust clears from its first meeting of 2012.

Whether the central bank's pledge to keep rates low "at least through late 2014" turns out to be a huge mistake or not remains to be seen, but based upon the halfhearted rally that followed the news and Thursday's poor showing, traders have found some downside in the Fed's decision to open up so completely.

Either that or traders were really counting on an early dose of quantitative easing.

UBS was generally positive in its assessment of the news but the firm did point some of the risks as well.

"[The] FOMC's statement inches the Fed closer to QE3 and certainly delays any move toward an exit strategy," UBS wrote in commentary early Thursday. "However, we think the Fed runs the risk of being whipsawed by both unemployment falling faster than they expect and inflation reaccelerating sooner (albeit only to near their long-run target)."

The firm also notes that succession could be an issue with Ben Bernanke's term set to expire in January 2014, as in well before late 2014.

TrimTabs, meantime, is taking issue with Bernanke's claim that the U.S. won't be bailing Europe out of its sovereign debt crisis. The research firm says the European Central Bank's repeated knocking on the Fed's liquidity swaps window is evidence to the contrary. The firm notes that, after drawing down another $11 billion in the week ended Jan. 19, the ECB's tab with the Fed is up to $103.3 billion.

"To put this amount into perspective, total swaps are now one-sixth the size of the Fed's 2010/2011 $600 billion QE2 program," TrimTabs said. "While Fed Chairman Ben Bernanke stated that the Fed has no intention to bail out Europe, the Fed's aggressive expansion of the Fed's balance sheet, up nearly 4%, or $106 billion, since early December, suggests otherwise. We view these actions as nothing more than a back door bailout of Eurozone banks."

The firm estimates the ECB's balance sheet jumped 36% -- $947 billion -- in 2011 to a record of $3.5 trillion. That increase reflects the $638 billion in low-interest loans that eurozone banks have received from the ECB in the long-term refinancing operation in December that's been credited with bringing some stability to the region. TrimTabs also doesn't believe either party is going to tap the brakes any time soon.
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