like it did on the first rate hike in 2015? old news Dec 16, 2015 4:10 pm Closing Market Summary: Stocks Climb After Fed Hikes Rates WRAPX) : "The stock market ended the midweek session on a higher note with the S&P 500 climbing 1.5%. The benchmark index shrugged off the first fed funds rate hike in nine years, reclaiming its 50- (2,060) and 200-day moving averages (2,062) in the process. Equity indices spiked at the start of the trading day, but the first half of the session featured a slow drip from opening highs as investors employed some caution ahead of the FOMC rate announcement; however, a rally to new highs unfolded during the late afternoon. The Federal Reserve lived up to expectations, calling for a 25-basis point hike to the federal funds target range, which had been stuck in the 0.00-0.25% range for exactly seven years. Interestingly, today's rate hike did not stop the committee from slightly lowering its core PCE inflation outlook for 2016 to 1.5-1.7% from 1.5-1.8% that had been expected in September. The Dollar Index (98.35, +0.13) displayed some volatility, but ended in the green. The index saw some pressure as Fed Chair Janet Yellen addressed the media, stressing the Fed's intention to stick to a gradual tightening path. Ms. Yellen acknowledged that the rate hike is taking place while inflation is well below the Fed's 2.0% target, but the Fed Chair believes that inflation will return to the 2.0% target once transitory factors fade away. Unlike stocks, Treasuries held slim losses going into the afternoon, but they lurched back to flat after the Fed announcement; however, the 10-yr note dipped back into the red during the late afternoon, pushing the benchmark yield up to 2.29% (+2 bps). Nine of ten sectors ended the day with gains while energy (-0.5%) spent the session below its flat line due to daylong weakness in crude oil. The energy component returned to last week's low, falling 4.7% to $35.55/bbl. after the latest EIA storage report showed a 4.8 million barrel inventory build. Similar to energy, the materials sector (+1.1%) underperformed, but the group was lifted into the green during afternoon action. Elsewhere, the top-weighted technology sector (+1.3%) also lagged, which contributed to the pullback from opening levels. Apple (AAPL 111.34, +0.85) was the culprit responsible for the early weakness, but the sector heavyweight benefited from the afternoon strength in the market. Thanks to the reversal, the largest stock by market cap climbed 0.8%, narrowing this week's loss to 1.6%. Staying on the cyclical side, the industrial sector (+1.8%) spent the day among the leaders, thanks in part to a 5.7% spike in Honeywell (HON 104.08, +5.61) after the company reaffirmed its guidance. Another sector component-Joy Global (JOY 12.16, +0.70)-also had a strong showing, surging 6.1%, despite reporting in-line earnings, lowering its guidance, and cutting its quarterly dividend to $0.01 from $0.20/share. Today's participation was well above average as more than 950 million shares changed hands at the NYSE floor. Economic data included Housing Starts, Building Permits, Industrial Production, and MBA Mortgage Index: Housing starts were at a seasonally adjusted annual rate SAAR) of 1.173 million in November. That was 10.5% above October's revised level of 1.062 million (from 1.060 million) and above the Briefing.com consensus estimate of 1.135 million Multifamily starts spiked 16.4% while single-family starts jumped 7.6% Building permits soared to a SAAR of 1.289 million. That was 11% above the revised October rate of 1.161 million (prior 1.150 million) and well ahead of the Briefing.com consensus estimate of 1.150 million That uptick was driven almost entirely by permits for multifamily units as single-family permit authorizations increased just 1.1% Industrial production declined 0.6% in November on the heels of a downwardly revised 0.4% decline (from -0.2%) in October The November reading was well below the Briefing.com consensus, which expected a downtick of 0.1% The November decline was paced by a 4.3% drop in utilities and a 1.1% decrease in mining activities The weekly MBA Mortgage Index fell 1.1% to follow last week's 1.2% increase Tomorrow, weekly Initial Claims (Briefing.com consensus 276,000), December Philadelphia Fed Survey (Briefing.com consensus 2.0), and Q3 Current Account Balance (Briefing.com consensus deficit of $114.20 billion) will be reported at 8:30 ET while November Leading Indicators will cross the wires at 10:00 ET. Nasdaq Composite +7.1% YTD S&P 500 +0.7% YTD Dow Jones Industrial Average -0.4% YTD Russell 2000 -4.3% YTD
It will pop when the fed changes every previous hawkish statements to dovish. I can guarantee they are rewriting every word in their fed statement this week to be absolutely more dovish because they already know wallstreet dictates the fed decisions and not the other way around!!! The Fed is NOT raising rates 4 time this year..
Historically the market has risen when Fed started to raise rates because the economy was strong and inflation was starting to heat up... the market always said, "this strong economy and strong earnings can "absorb" the rate hike and stocks continue higher anyway, no worries". This time they'll be trying to throttle inflation from a different perspective (presuming they actually follow through on rate hikes). I wouldn't be surprised to see "Powell dove speak" pop the markets... perhaps back to the highs... but not launch a new bull leg.
It's one of those few instances when trader/investor psychology is clearly seen in the charts. Everybody gets stressed during the anticipation of a rate hike, and once it happens there's a big sigh of relief when anxious traders realize the world didn't just come to an end.
I agree with this. When that rake hike happens, or really at least some time before, market will shoot up a good bit. Question is exactly when.
I don't think he gives a damn anymore, and neither do any of the other FOMC members. Remember, they got caught with hands in cookie jar enriching themselves with stocks. Now that they cannot do this anymore, they do not give a shit about markets, or peoples' 401Ks, or anything else regarding the little people. Now they can focus on their job, which is to beat the economy into submission and get their precious 2% inflation "target".
today's market action was just like it behaved in the past; regardless, which way one looks at (technically, psychologically, statistically, fundamentally [in terms of we won't have recession soon]), the numbers are against the bears. I think the bears would take their money and run for the bars and strip clubs tomorrow ....
I admire you for going on record with this. That takes guts. (I bookmarked your post.) ""Prediction is hard, especially about the future." -- Yogi Berra.