Market Analysis

Bonds improved yesterday on a surprise from the post meeting statement from the Federal Reserve which extended by 1 year the period during which the Fed expects to keep their Federal Funds rate at near 0.   The Fed said, ".....the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."  The announcement by the Fed is an attempt to incentivize corporate and institutional investors into investing in riskier assets that would generate growth for the economy.  Essentially the Fed is telling investors that they are not going to earn more than the rate of inflation by investing in "safe" assets and that the Fed will do whatever it can to make sure that Fed policies are accomodative of growth so that "risky" assets have as good a chance as possible of producing better returns.  This announcement is being viewed as a better alternative for the Fed than announcing a new bond buying program.

In economic news, Initial Jobless Claims for the week ended 1/21/12 came in at 377,000 which almost matched the 375,000 economists were expecting.  December Durable Goods Orders came in up 3% which was better than the 2% expected and November Durable Goods Orders were revised up from 3.7% growth to 4.3% growth.  December Durable Goods Orders excluding the more volatile automotive component were up 2.1% which was much stronger than the .7% expected growth.