US Stock Market Rally Fizzles as the Fed Backpedals from Hawkishness; Implicit Admission of Policy Error?

I wrote last weekend that because of government support (magic from the central bank put) plus oversold conditions this week should be a big moment for the bulls.

Well, the  US FOMC meeting just concluded, and the reaction by US stocks hasn't been lively.

Here's what mainstream media had to say of the Fed meeting (Wall Street Journal):

The Federal Reserve signaled renewed worry about financial-market turbulence and slow overseas economic growth but was noncommittal on whether these threats would throw its interest-rate plans off course.

The U.S. central bank raised short-term interest rates by a quarter percentage point in December and has penciled in four more quarter-percentage-point rate increases this year, the next one possibly as soon as March.

A policy statement released by the Fed after a two-day meeting raised new doubts about whether it would follow through with a rate move in March. Futures markets place just a 25% probability on rate increase by then. But the central bank sought to keep all of its options open while it assesses a potentially shifting economic landscape.

The changes in the Fed statement as shown by the Wall Street Journal. 

So in echoing the Fed's concerns prior to the December rate hike, the FED backtracked to use global anxieties to convey their supposed 'openness' or a seismic shift from hawkish stance to neutral. Might I say admission of policy error?

And here is how US stocks reacted (above table from stockcharts.com). 

Not even the 5.4% surge in oil prices helped mitigate yesterday's activities. Today's losses only eroded much of the gains acquired for the week, which leaves US stocks still drifting near January lows.

So far my big moment for the bulls have been divergent.

Chinese stocks have failed to live by the government hype where the latter would intervene to fight off speculators for the benefit of  investors.

Oh yes, the Chinese government was all over yesterday afternoon to help stanch what would have been another blood bath...

The Shanghai index plunged to a depth of 3.8% post lunch, where the Chinese National Team went on a furious pump. 

Unfortunately, the Chinese government had been unable to hold on to the slight gains from their interventions, to close the day still down. This marks the biggest two day loss since August.

So far Europe's gains have been modest, and it's been Japanese stocks that has seen quite a big bounce (aside from the Philippine Phisix) as Japan's gamblers awaits the outlook from Bank of Japan's meeting on Friday. 

Will the BoJ expand easing?

So far central bank magic have hardly provided a meaningful boost to global stocks. Yet what happens when the magic fades?

Two days left for the big moment.