It Took Just Two Sentences From The Fed Today To Make The Stock Market Go Wild

The stock market violently reversed its slide today, with the Dow gaining over 270 points, and the NASDAQ rallying over 2%.

The event that made stocks take off like a rocket ship was the Fed minutes that came out at 2 PM ET.

The Minutes - which reflect the nature of the conversation at the Fed's last meeting - contained two critical lines.

Here they are:

-- Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector.

-- At the same time, a couple of participants pointed out that the appreciation of the dollar might also tend to slow the gradual increase in inflation toward the FOMC's 2 percent goal.

In recent days we've been writing a lot about how the market is perceiving monetary policy to be tightening significantly. Short-term interest rates have been on the rise, inflation expectations are falling, and the dollar has been surging.

With those two lines, the Fed has explicitly acknowledged what the market is concerned about, that policy is tightening and that inflation growth may be depressed.

And with that acknowledgment, stocks surged.