Fed Spoils New Year's Party

What a difference a word makes. In the December FOMC statement, the Federal Reserve added the word "substantial" to characterize the downturn in the U.S. housing market. Investors took the change to mean the central bank was slightly more dovish. The hope was that the Fed might loosen its grip on its tightening bias, if not signal it is contemplating future rate cuts.

But such hopes were dashed Wednesday when the minutes of that same December FOMC meeting came out at 2 p.m. EST.

"The market is disappointed we're not seeing a Fed that becomes less hawkish and opens the door to rate cuts," says Art Hogan, chief markets analyst at Jefferies & Co. "There wasn't enough of a shift to neutral." ...