Fed Doves Rally Bulls

Traders saw only doves Wednesday, despite the hawk, or perhaps the vultures, circling high above.

The Federal Reserve kept the fed funds rate steady at 5.25%, as expected, but changed the language in the accompanying statement to soften its tightening bias. Traders read the statement as solidly dovish and indicative of a near-term rate cut, even though the Fed also took pains to emphasize that inflation is the key risk to its outlook.

The stock and bond market rallied immediately after the statement was released. Stock traders shrugged off earlier concerns about FedEx's(FDX Quote) earnings and comments about an uncertain economy, sending major averages on their sharpest rally this year. ...