Markets pushed higher from early morning losses as the Fed indicated its intention to keep rates low through to the end of 2014.   The effects of this decision were felt across asset classes.

Bond prices traded higher, pushing yields lower in the process.   Yields had been trading higher over the last few days as money from the bond market was noted to be flowing from fixed income assets into equities

Commodities jumped on the announcement as the perception of easy money increased inflation expectations.   The ratio of the Treasury Inflation Protected ETF versus the 10-year Treasury ETF showed a significant rebound from early morning losses, piercing a declining trendline that had been in place for 9 months.   Increased inflation expectations is bullish for commodities, which are seasonally strong in the first quarter of the year.

The “easy money” benefit to commodities is obviously a detriment to the US Dollar, which relinquished strong morning gains.   The US Dollar Index has been finding support at its 50-day moving average over the last few sessions as the Euro strengthens, placing pressure on the domestic currency.   Speculation remains that Europe will have to enact more significant monetary easing measures than are already in place in order to stimulate the economy out of a potential recession.   This implies that the negative pressures on the Euro are likely to remain in place for some time, instilling strength into the dollar, as is seasonally typical during the first quarter of the year.

And finally, stocks rallied on the potential investment that would be derived by the extended period of low cost borrowing.   However, financials took a hit, relinquishing its outperforming position it had maintained against the market for the first few weeks of this year.   The financial sector will find their business constrained as a result of this rate commitment, meaning that financials will likely resume their underperforming role against market benchmarks, once again acting as a strain on equity indices.   Utilities are a beneficiary of this low interest rate environment due to the highly leveraged nature of their business.   As a result, the Utilities sector surged in afternoon trading, outperforming the market.   Utilities seasonally underperform in the first quarter, again following the inverse seasonal trend of interest rates.

So the events of today are doing a lot to both negate seasonal trends for some areas of the market, such as the financial and utilities sector, while strengthening it for others, such as materials and energy.   Still, markets have become so overbought that a correction of some sort seems inevitable.   The Relative Strength Index (RSI) for the S&P 500 Index has crossed above 70, a rare event that has typically marked a peak when such an occurrence is realized.   Tendencies during the month of February are negative to begin with, signaling that this may be the likely period that a correction plays out.   A pullback from this juncture would be healthy in order to determine the levels that investors feel at ease with maintaining.