Stocks Down Sharply in Wake of FOMC Minutes

The U.S. stock market is trading within the vicinity of session lows in the wake of this afternoon's FOMC minutes. Traders are reacting to the Fed's plan to hold off on additional easing measures unless the economic expansion begins to falter or prices fail to meet the central bank's 2 percent objective. The minutes stated that “A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below” 2 percent. The Fed, however, did affirm its stated plan to hold interest rates near zero through late 2014. Recent comments by Chairman Bernanke also indicate that dovish monetary policy is here to stay in the near-term. He said that it's "far too early to declare victory" last week and confirmed that the Fed is not taking any of its policy options off of the table. In an interview with ABC News, the Fed chief said that “We need to be cautious and make sure this is sustainable. We haven't quite yet got to the point where we can be completely confident that we're on a track to full recovery.” The sentiment of the minutes, however, shows that the central bank does not believe additional stimulus is imminently necessary. Currently, the Fed is conducting "Operation Twist," whereby the central bank is selling shorter-term securities and using the proceeds to buy longer dated securities. The goal of the policy is to flatten the yield curve and bring down long-term interest rates. The program will end in June 2012. The market is currently attempting to evaluate whether more easing efforts are likely after the end of "Operation Twist." The FOMC statement suggests that the Fed remains in a holding pattern. Fed policy makers currently do not see growth picking up to such an extent that it would cause them to change their outlook, but they also remain hesitant to telegraph further easing to the markets. “Most participants did not interpret the recent economic and financial information as pointing to a material revision to the outlook for 2013 and 2014,” the minutes said. For investors, the fear is that the huge rally in risk assets to start 2012 could be put into jeopardy as market participants begin to anticipate the end of the Fed's bond buying under "Operation Twist." Recall that last year, when QE2 came to an end, it coincided with a steep sell-off in the stock market and massive market volatility. Stocks, which were already trading lower, weakened in the wake of the FOMC release. At its worst levels, the Dow Jones Industrial Average was down more than triple digits. At last check, the Dow had lost roughly 84 points and was trading at 13,180. The S&P 500 was down 8 points, or 0.57%, and the Nasdaq composite had registered a loss of 11 points, or 0.36%. Other assets are also making sharp moves in the wake of the FOMC statement. Gold futures have shed 2.25% to 1,641.90 and the SPDR Gold Trust ETF

was down 2.03% to $159.63 with most of the day's losses coming post-FOMC. Treasury prices have also been weakening as the market adjusts its expectation for Fed bond participation in the government bond market. At last check, the iShares Barclays 20+ Year Treasury Bond ETF

was down 1.16% to $111.24 and continuing to move lower into the close.