By Greg Peel

The Dow closed down 64 points or 0.5% while the S&P lost 0.4% to 1413 and the Nasdaq dropped 0.2% (despite Apple making a new high).

Lisa Simpson once famously explained that its the spaces between the music that make jazz so great. When it comes to interpreting Fed statements and FOMC minutes (and indeed also the case with the RBA) it's often what's not said that proves more important than what is said.

Yesterday the RBA was uncharacteristically coy, pretty much suggesting there will be a rate cut in May assuming the March quarter inflation result does not surprise to the upside. Last night's release of the minutes of the last Fed meeting were a contrast, as Wall Street looked desperately for what wasn't there.

To recap, we've had QE1 from March 2009 and QE2 from late 2010 and in late 2011 we got Operation Twist. That policy has kept QE2 steady but not growing by switching to longer dated bond purchases from shorter dates, and it is due to expire in June. When things were looking rather scary late last year on the European front, Ben Bernanke openly assured markets that QE3 was in the breach and ready to be fired if necessary (even though he never uses "QE" in his statements). When the European crisis eased, Bernanke then suggested perhaps not QE3 per se but a "sterilised" form of QE which does not effectively expand the Fed balance sheet. And now here we are at the end of the March quarter, and the US economy is looking pretty good.

Wall Street is certainly excited about signs of recovery, as evidenced by the best March quarter performance in 14 years. Yet all along, Bernanke has played down the excitement, fearing employment growth might begin to ease and reminding of the stagnant housing market. QE3 seemed to be off, then on again, then off again. In the previous January meeting, QE3 was discussed. In last month's meeting, only sterilisation was discussed. Wall Street's conclusion? QE3 is off the table.

The FOMC is still clearly worried about the employment situation, having discussed the likelihood that the unseasonably warm winter has distorted employment growth numbers. It could have been a different story if the US had been snowbound like the year before. And the members must also be wary that 2011 began exactly the same way, with the US economy looking strong. Then it fell into a European hole and QE talk was back on the agenda.

So what do we make of it all? Wall Street was already trading lower ahead of the 2.15pm release of the minutes, with the Dow down around 40 points. On the release the Dow quickly fell to be down 133 points. Oh my God, no more lollies from Uncle Ben. We're doomed.

But hiding in the wings were those who bizarrely believe that if the US economy is sufficiently strong not to require a third round of massive, inflationary monetary stimulus then surely that is a good thing. What strange people. So as the session wound down, buying took the indices up to their closing levels.

A more noticeable response was felt in financial instruments. The US dollar index had been steady all day and then shot up 0.7% at 2.15pm to 79.38. The yield on the ten-year bond similarly leapt ten basis points to 2.28%. On the other side of the coin, gold crashed US$31.60 to US$1646.50/oz and the Aussie, which was already a bit weaker yesterday after the RBA statement, is down a cent to US$1.0327. No QE3 means no more Monopoly money.

A lack of further US dollar devaluation also provides mathematical weakness for commodity prices, and West Texas crude duly fell US$1.12 to US$104.11/bbl while Brent lost US35c to US$125.04/bbl. Base metals in London were a little stronger but closed before the release of the minutes, so ceteris paribus metal prices should be lower tonight. US material sector stocks certainly anticipated such by falling last night.

A bit lost in the Fed wash were the release of US factory orders for February, which rose 1.3%, and vehicle sales for March, which were the strongest since before the GFC. Americans are now buying small cars and hybrids, and GM is recovering well by building them. My God what has the world come to?

So there was some afternoon rock and roll on Wall Street last night, but we can reminisce that if this were 2010 and QE2 was taken off the table the Dow probably would have fallen 500 points. No QE3 is good, not bad. Besides which, you don't think QE3 won't be back again if we hit another European speed bump?

The SPI Overnight was down 17 points or 0.4%.

We won't have to wait long to get an update on US employment, with the ADP number out tonight and non-farm payrolls on Friday. Ahead of that it's services PMI day across the globe today, while the ECB will hold a monetary policy meeting tonight.

All