From a Jon Hilsenrath (with Victorica McGrane) article late on Friday: Fed Officials Weigh In on Bernanke Comments (The Wall Street Journal is often gated, so if you’re unable to access the article try a search of Google news using the headline)

Says Fed officials took an ‘unusual step’ in speaking “with remarkable cohesiveness about their policy plans”, and that the officials “repeatedly challenged perceptions in financial markets that they would quickly rein in the central bank’s easy-money policies”
Hilsenrath/McGrane cite:

  • Fed governor Jeremy Stein – Investors were making “a mistake” if they thought the Fed had sharply changed its interest-rate plans in recent weeks,
  • San Francisco Fed President John Williams – “a large majority” of Fed officials don’t want to start raising short-term interest rates until 2015 or later,
  • Fed governor Jerome Powell – market movements were “larger than would be justified” by the Fed’s stance on interest rates,
  • and New York Fed President William Dudley – markets were “out of sync” with what the Fed was thinking

Hilsenrath/McGrane go on to say:

  • The common refrain shows how unnerved Fed officials were by the market’s initial reaction. The drop in stock prices and the rise in long-term interest rates could short-circuit the faster recovery that officials are hoping to achieve.

The article, in summing up, notes that not all this week’s comments were in unison though; with comments from Richmond Fed President Jeffrey Lacker that the sharp falls in bond and stock markets weren’t the result of any misunderstanding by investors, but rather that the declines were “a normal part of the process of incorporating new information into asset prices.”

I would add that market participants are not going to wait until policy change is spelled out in detail to exit positions, a hint is often enough. This is how markets work.

The sharp moves show that the door to exit trades built on continuing QE and low interest rates is not wide – the rapid price moves are a natural response to a mismatch between those wanting to exit trades and those willing to take the positions off their hands. Why stick in a bid when there is a desperate herd wanting to sell? Lower the bid, at least, and get set at a better price.