Lipstick on a Pig

That is how one analysts describes the coordinated effort by the Federal Reserve and several other central banks to drive down interest rates by injecting new liquidity into the bond market. William O'Donnell at UBS Securities said "What the program will not do is cure the cancer that got us here in the first place - the housing bust, the collapse in credit conditions, etc. We view this new program as palliative, and not a cure. Much more time is needed and much more pain is up ahead."

The way this plan emerged is puzzling. On Tuesday the Fed disappointed the markets with a quarter-point interest rate cut and the Dow promptly plunged. More important, key lending rates did not budge, showing that banks were still unwilling to extend credit. Then Wednesday morning the broader plan was announced. It would have made much more sense and saved everyone a lot of grief had they announced both at the same time. It is unclear why this was not done. Confidence in the Fed is waning, and it couldn't come at a worse time. For this reason we continue to favor defensive equity sectors such as health care, utilities and consumer staples.

International funds had a nice run in recent weeks as the dollar lost ground against other major currencies. That trend appears to have slowed.