FED plans to buy $1 trillion of bonds in order to lower borrowing costs and revive growth

FED surprises market with an expanded recovery plan, stocks close higher: DJIA +1.23%, S&P500 +2.09%, NSDQ +1.99%. Financials rallied 10%.

Bernanke's plan is more aggressive than expected. FED plans to buy $1 trillion (that's a 1 followed by lots of 0s!) of bonds in order to lower borrowing costs and revive growth. This includes $300 bio of government bonds, something which the market was not anticipating. Such a huge liquidity injection boosted sentiment in the market.

Yields on 10yr Treasuries plummeted 48bps to 2.53%.

Oil climbs close to $50 on speculation that the FED's move will end the global recession and increase fuel demand. Weaker $ also pushes oil price higher. However, overall consumption remains soft and US economic indicators are still quite weak.

Gold moves back up: $931. Such a huge quantitative easing plan from the FED revives fears of longer term inflation.

$ plunges vs € (1.3478). The FED will fund its purchases of debt by printing extra dollars. This over supply can be $ negative.

VIX closes in on 40.

Europe open positive (+1%) but US futures are showing negative.

 

 

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