Friends
It finally happened. The Fed has actually raised interest rates. Yes, it’s only ¼%, but it marks the first time the Fed has raised rates in 9 years and the first time we have been off of the emergency 0% interest rate policy (ZIRP) in almost 7 years. Market participants, of course, weren’t surprised by today’s FOMC action as Fed Chair Janet Yellen and Co. have been signaling their intentions for some time now (though they did “chicken out” back in September). Officially, the Fed raises its target for the Fed Funds rate to a range of .25% to .50%, which is a quarter point higher than the previous range of 0% to .25%.
Of course, the statement and Ms. Yellen’s press conference wanted to assure the markets that the rise in rates will be very gradual and data dependent. They don’t want the markets to freak out over the possibility of quickly rising interest rates. The economic conditions that we find ourselves in here domestically and abroad would seem to argue that a cautious and deliberate approach to rate hikes is preferred.
How did stocks react? Stocks were up nicely in early morning trading, adding to yesterday’s gains, as traders had made peace with fact that the Fed was about to embark on liftoff. After the announcement and the press conference, stocks added even more to those gains. For the day, the Dow Jones Industrial Average was up 223 points to finish the day at 17,748. The S&P 500 was up 29 points to close at 2073. Gold was up $10.70 to trade at $1072 per ounce, while oil was down $1.70 to trade at $35.65 per barrel WTI.
Now that we finally have liftoff behind us what will become the next focus for market participants? The Fed should now be able to take a deep breath and know that ZIRP is finally behind us (well, at least we hope so). Most likely, the junk bond market and oil prices will continue to be in the forefront of investors’ minds-at least until the end of the year.
Have a nice evening everyone.
