On the margin the Fed was dovish yesterday, but after bouncing higher, markets reversed lower and finished flat. Bernanke & Co. said the expansion has been modest and pledged to keep buying $85B of bonds a month. Inflation expectations were a focus of the Fed statement. They noted that inflation is too low.
Today, better economic data is driving risk. U.S. weekly jobless claims fell to 326K, the lowest level since January 2008 and PMI data from China and Europe was better. Expectations for a better unemployment rate tomorrow are being priced into the market.
The yield curve on treasuries steepens to widest spread since September 2011. Investors are positioning for faster growth and rising inflation. Stocks are looking more attractive.