NEW YORK ( TheStreet) -- The Fed announced it would continue to taper its bond buying despite much weaker-than-expected economic growth. And, to the surprise of many on StockTwits.com, the markets didn't shudder.
The S&P 500, Dow and Nasdaq each held on to gains of 0.2% or more after the The Federal Open Markets Committee's announcement. The FOMC said it would buy $20 billion worth of mortgage backed securities in May, $5 billion less than it purchased this month. It will buy $25 billion worth of longer-term treasuries in May, also a reduction of $5 billion from the prior month.
The $10 billion taper is largely what economists expected and showed that the Federal Reserve would not change policy because of a single quarter of poor economic growth. The government released advance GDP figures this morning that showed the economy grew an anemic 0.1%, far less than the 1.1% expected.
Earlier this year, Federal Reserve Chair Janet Yellen said the Fed did not have a timetable for exiting the stimulus program known as quantitative easing -- despite reports that the Fed plans to keep cutting billions a month from its bond purchases with the goal of finishing QE at the end of the year. Yellen has also said the Fed will keep benchmark interest rates near all-time lows well after unemployment falls below 6.5%, its initial target.
For a Fed taper that's not on a preset course, this taper sure looks to be on a preset course. ? Neo (@Loyola80) Apr. 30 at 02:33 PM
In its statement, the FOMC said it will use a basket of data in order to assess when the federal funds rate should rise above the target range of 0 to 1/4 percent. "This assessment will take into account a wide range of information, including measure of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments."
Amazing that the Fed used an employment target and then had to drop it because it was fake/useless data with no bearing on reality. $$ ? David Durand (@SunAndStorm) Apr. 30 at 03:08 PM
At the time of publication, the author held no positions in any of the stocks mentioned.