Could someone explain to me what the currently tanking stock market knows today that it didn’t know yesterday?
The twist was expected, at about the magnitude the Fed announced ($400 bn). Yes, the FOMC statement (the Fed’s press release) was downbeat, but they already told us they were planning to keep rates low until 2013.
There are drops in Euro and Chinese manufacturing indexes out this AM, but markets were declining before these releases—this selloff seems keyed off of the Fed report.
If there’s any rationality to it—a big ‘if’—I’d say it has to do with being stuck in box #3 (see box in post below this one). The absence of a commitment to attack the problem of weak demand through fiscal stimulus is our biggest economic problem right now. And it’s not going away.