STOCKS TUMBLE AFTER YELLEN SAYS 'SIX MONTHS': Here's What You Need To Know

First, the scoreboard:

• Dow: 16,238.1 (-98.0, -0.6%)
• S&P 500: 1,861.6 (-10.6, -0.5%)
• Nasdaq: 4,305.2 (-28.0, -0.6%)

And now the top stories:

• The Federal Reserve wrapped up its two-day Federal Open Market Committee meeting, published its statement, and held its first post-meeting press conference led by Janet Yellen. The big surprise came when Yellen attempted to clarify the length of the period between then end of the large-scale asset-purchase program and the first interest rate hike. In a nutshell, that length was a lot shorter than expected, and that freaked everyone out that the Fed more hawkish than expected.
• Before we get to that, we should first not that the Fed announced it was ditching the "Evans Rule." This was expected. This was the component of forward guidance that included an unemployment rate threshold of 6.5% and an inflation rate of 2.5%. Basically, if these thresholds were breached, then the market should be prepared for the Fed to soon begin raising rates. "With the unemployment rate nearing 6-1/2 percent, the Committee has updated its forward guidance," they said. "The change in the Committee's guidance does not indicate any change in the Committee's policy intentions as set forth in its recent statements."
• That was replaced with this new language: "The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored."
• Here's what really seemed to rock markets: During the Q&A of her press conference, Yellen was asked to clarify what the Fed meant by the "considerable time" between the Fed's asset purchase program and the first increase in the federal funds rate. Yellen said "something in the order of six months." That's a bit earlier than what most were expecting.
• Here's TD Securities' Millan Mulraine: "Based on this assessment, if QE ends this fall then first rate hike could take place by the summer of 2015. It is hard to know if Yellen wanted the market (which has taken it hard on the chin following that particular remark) to start thinking of mid-2015 hike, but that is what was implied by her statement."
• In other news, the Fed announced further tapering of its asset purchase program (aka quantitative easing). That too was expected. "Beginning in April, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $25 billion per month rather than $30 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $30 billion per month rather than $35 billion per month."
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