Bank Downgrades Steal the Feds thunders as the announcement of Operation Twist. The Fed decision to do the twist was met with boos on the floor of the CME Group in Chicago and a major stock and commodity sell off around the globe. The announcement by the Fed to extend the average maturity of it holdings buy $400 billion treasuries with 6 to 30 year maturity and at the same time sell an equal amount of securities with maturities of 3 years or less looked kind of puny after the Moody's downgraded some of the debt of Bank of America and Wells Fargo with the proclamation by Moody's that these banks are no longer too big to fail.

After that the market talked itself into the belief that along with the Twist that perhaps the Fed would give us an encore of QE3d but instead all we got was a dour and dreary assessment of our struggling economy. The Fed said that economic growth will remain slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate.

Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

Make you feel warm and fuzzy all over does it not? Oh Yeah and they are buying some Mortgage backed securities! Yippee. Well oil Prices sure forgot about the big time draw in Crude supply because of all of the macro economic worries. The EIA said that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.3 million barrels from the previous week. At 339.0 million barrels, U.S. crude oil inventories are in the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 3.3 million barrels last week and re above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.9 million barrels last week and are in the upper limit of the average range for this time of year. Propane/propylene inventories increased by 0.6 million barrels last week and are below the lower limit of the average range. Total commercial petroleum inventories decreased by 5.3 million barrels last week. Total products supplied over the last four-week period have averaged about 19.2 million barrels per day, down by 0.9 percent compared to the similar period last year. Over the last four weeks, motor gasoline product supplied has averaged just under 9.0 million barrels per day, down by 1.7 percent from the same period last year. Distillate fuel product supplied has averaged nearly 3.9 million barrels per day over the last four weeks, up by 0.5 percent from the same period last year. Jet fuel product supplied is 3.3 percent lower over the last four weeks compared to the same four-week period last year.

Still the big draw in crude seems to be a case of the EIA Playing Catch Up!
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