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Stocks Back Near Flat Line After Post-Fed Volatility - U.S. Commentary

Stocks saw considerable volatility following the Federal Reserve's announcement of its decision to extend "Operation Twist." After initially falling sharply on the heels of the news, the major averages showed a strong move back to the upside.

The volatility on Wall Street came after the Fed announced its decision to continue its program to extend the average maturity of its holdings of securities through the end of the year.

The program, known as "Operation Twist," involves replacing short-term securities in the Fed's bond portfolio with longer-term securities in an effort to push already low long-term interest rates even lower.

Rob Carnell, chief international economist at ING, said, "Most Fed watchers were expecting an extension of the Twist operation at this latest FOMC meeting. After all, the hurdle for QE3, we were previously told, was very high."

"Moreover, allowing the twist to expire, even if you believed it was essentially a useless policy (we did), was akin to a monetary tightening, albeit a tiny one," he added.

Later this afternoon, the Fed's revised economic forecasts may attract some attention along with Chairman Ben Bernanke's press conference.

While most of the major sectors are showing only modest moves in mid-afternoon trading, considerable strength has emerged among airline stocks. The NYSE Arca Airline Index has surged up by 1.2 percent, reaching its best intraday level in four months.

Semiconductor, steel, and financial stocks have also shown strong moves to the upside, while weakness remains visible among trucking, railroad, and utilities stocks.

The major averages have pulled back near the unchanged line in recent trading and are currently mixed. While the S&P 500 is down 0.39 points or less than a tenth of a percent at 1,357.59, the Dow is up 6.06 points or 0.1 percent at 12,843.39 and the Nasdaq is up 4.08 points or 0.1 percent at 2,933.84.

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