Brian Sozzi Discusses Statement From Fed

Brian Sozzi of Wall Street Strategies is out with a note on the statement from the Federal Reserve, which did not announce a third round of quantitative easing, but said that it is likely to keep interest rates at current levels until at least mid 2013, if conditions warrant.

In the note, Sozzi writes, "The stage was set for Uncle Ben to serve up some warm rice to the positive news starved markets this afternoon, but wound up shoveling on a heavy dose of cold, hard reality instead. Major equity indices are acting very volatile in the moments immediately after, though the downdraft should not be disregarded as knee-jerk. For as Chairman Bernanke did in fact dole out a bit of rice (left door open to further quantitative easing), it was not enough to satisfy the appetites of a hungry market yearning to put in a bottom."

Sozzi goes on to decipher how he is reading the statement, as there has been a lot of confusion whether it is positive for risky assets or not. Sozzi reads its as economic growth is considerably lower than expected, due to a "deterioration in overall labor market conditions."

The Fed did acknowledge downward GDP revisions job creation, which is below optimal levels.

The Fed also talked about inflation no longer a pressing issue, but there could be the potential for stagflation.