You read it here first; beware of the vicious short-covering rally.

And that's exactly what the market got with the S&P stock index closing +4.7% higher on the day.

What sparked the late-day surge?

The Federal Reserve's comments did not add anything substantial to the mix other than the expected language on keeping rates low for an extended period of time.

Late-day earnings from insurer MBIA were better than expected but those earnings alone could not have moved stocks in the manner that they moved.

The most credible explanation is that the technical bounce came from short-covering as program trading kicked in.

As for Treasury bonds the rally continues unabated…

Heads I win, tails I win.

The yield on the 10 year Treasury bond hit a nadir of 2.03%, almost dipping below 2% before bouncing off the highs (and it will get below 2% before the year is out).

Corporate credit spreads tightened across the board in action that was mostly driven by the street and short-covering.

There were a few real-money investors buying up corporate and financial bonds which are trading at the all-time wide levels of the year.

Importantly though there was not enough demand to signal a substantive change in investor sentiment for corporate and financial bonds.

"Bonds are cheap" goes the refrain but cheap is becoming a very relative concept.

If it is any indicator, dealer appetite for risk remains extremely sparse.

Liquidity is very thin in the markets and that might go some way toward explaining the crazy price movements we're seeing.

As one player put it, "I'm seeing bids get hit at some levels and I'm like…what??!!!"

Back to the FOMC (Federal Open Market Committee) decision it was refreshing to see that there were three dissenters (Fisher, Plosser, and Kocherlakota).

It is clear that loose monetary policy will do little to solve the problems afflicting the real economy: namely unemployment.

The ground is ripe for some serious fiscal reforms.

The U.S. sovereign credit downgrade by the rating agencies, while of dubious timing, should provide an impetus for real change.

The Federal government needs to get beyond its obsession with size and pork-barrel politics.

This is an issue that transcends party politics.

The Federal government needs to go back to trusting the dynamism of the private sector to power this economy back out of its rut.

Tax cuts, despite what any detractors may say, will go a long way toward this effort.

The need for reforms becomes all the more urgent in the context of the Chinese economic slowdown and Europe's sovereign woes.

We live in a dynamic world and the only constant is change.