The Federal Reserve's "Operation Twist" turned out to be a dud... and now multiple bellwethers are predicting global economic slowdown. They came, they saw, they tanked the markets... Wednesday was supposed to be a good day for bulls. High hopes were placed on the Federal Reserve, and the likelihood they would "do something" to keep the economy and asset prices propped up. They did do something. But Operation Twist turned out to be Operation Bust. Hopes were dashed on realizing that a $400 billion shuffle, from short-term Treasuries to long, was all the markets would get. Small beer, that. The idea -- pushing down long-term interest rates to help the U.S. economy -- never made much sense. Long rates were already at rock-bottom lows, a reflection of the fear that things will stay sluggish for years. 

So how would it help to push low rates down even further? The economy needs jobs, not juice. We have a red tape problem, not a liquidity problem. And yet, as Charlie Munger has quipped: "To the man with a hammer, everything looks like a nail." All the Federal Reserve can do is run the printing press and tweak interest rate levels. So Fed officials try to convince themselves such will help. But it wasn't just the Federal Reserve that sent markets into a tailspin this week. Data came in ugly from other corners of the world too. China's manufacturing sector contracted, for the third month in a row. Eurozone manufacturing contracted for the first time since 2009. Financial stocks were bloodied. And Mohamed El-Erian, the CEO of bond giant PIMCO, warned of crisis in the European banking system.

There are signs of "an institutional run on French banks," El-Erian noted in the Financial Times. He fears that, if the run intensifies, Europe could be "thrown into a full-blown banking crisis that aggravates the sovereign debt trap, renders certain another economic recession and significantly worsens the outlook for the global economy." Amid equity bellwethers, one name to watch is FedEx (FDX:NYSE), the second-largest package delivery company on the planet. Thanks to the scope and scale of its operations, FedEx is a window into global economic activity. When FDX is strong, customers are shipping and receiving all sorts of packages, indicating a healthy business climate.

When FDX weakens, however, it can be a negative "tell" with potential downturn in the cards. As the chart above shows, FDX is now flashing a major warning sign. The company reported higher quarterly profits this week, but cut back on its full-year outlook. The stock dropped 10% on the news. If you're loving this article, sign up for Taipan Daily to receive all of Justice Litle's investment commentary. Yet another fallen giant is Morgan Stanley (MS:NYSE), trading near its old financial crisis lows. It's hard to pin down the European bank exposure at Morgan; investors are selling now and asking questions later.

The beat goes on... Bank of America (BAC:NYSE) plumbs fresh lows as I write. Goldman Sachs (GS:NYSE) is back below $100 per share, for the first time since March 2009. The whole financial sector is in flames. A new round of bank downgrades from Moody's came at an exquisitely awful time. Even commodities are taking it on the chin this week. That's at least partially due to "portfolio contagion," where losses in one area of the portfolio lead to Just about the only upside winners this week have been volatility, Treasuries and the U.S. dollar. The USD has broken out on large volume, in corresponding mirror image to breakdowns in the euro, British pound, Australian dollar and so on. (Macro Trader continues to be short the euro and short China.)

It's further notable that the dollar surged in the aftermath of a Federal Reserve announcement. For quite some time, Chairman Ben Bernanke has been cast as a destroyer of the dollar. The Fed's words and actions are known for hammering the USD down, not pushing it up. If that equation has flipped around, however, it could indicate a sea change in market psychology. If the powers that be are seen as "out of bullets" -- stimulus measures played out, from the U.S. to Europe to China -- deflationary slowdown fears could squeeze the markets in an even tighter vise grip.