0.25% Interest Rate Hike: The Results
With the new rate imposed the markets have seen themselves falling at a daily rate.
Today we have collected trending news articles from around the web capturing the results from the recent 0.25% rate hike imposed be the FED. If you want to see the markets first-hand take at look at the DOW as it stands today.
As seen on Money Morning:
Will the stock market crash today following a December rate hike announcement from the U.S. Federal Reserve?With the Fed prepared to raise interest rates for the first time since 2006, many are asking, "Will the stock market crash today?" Here's your full answer. The Fed is expected to raise interest rates today (Wednesday) for the first time since June 2006. To decide if it's a good time to raise rates at today's FOMC meeting, the Fed will look closely at the U.S. employment situation, inflation, and the global economy. If these indicators show the U.S. economy has recovered from the Great Recession, then we expect the Fed to raise rates by a quarter of a percentage point (0.25%), according to Money Morning Capital Wave Strategist Shah Gilani.While a Fed interest rate hike could send stocks lower this afternoon, investors should not expect a stock market crash today.According to Gilani, a December rate hike might not have much of an effect on stocks. That's because it's already "baked in" to the equities market. Investors have been anticipating the Fed to raise rates for such a long time, they've adjusted their stock investments to accommodate for a December rate hike.
As seen on The Guardian:
Stock market investors are bracing for panic selling in New York and London before what is expected to be the first rate rise by the US Federal Reserve since 2006. The US central bank will decide on Wednesday whether to raise interest rates as a mark of the US economy’s strong recovery since the 2008 banking crash.Fed boss Janet Yellen is expected to announce the increase in borrowing costs despite a slowdown in global trade and a slump in oil and commodity prices that has pushed inflation down to almost zero in most developed countries. Shares plunged on Friday and oil prices tumbled as the date neared for the Fed decision and investors became increasingly nervous of the impact on highly indebted emerging market economies.The level of borrowing by businesses and governments in China, Thailand, Indonesia and Brazil has soared in the past decade. Borrowing by emerging market economies has more than quadrupled from $4tn (£2.6tn) in 2004 to $18tn in 2014, much of it in dollars, making them vulnerable to higher US interest rates.Phil Shaw, the chief UK economist at fund manager Investec, said it was almost certain that the Fed would raise rates, but the question for markets was whether or not Yellen would signal further rises over the coming months.The rate rise heard around the world: Janet Yellen prepares for her big decisionRead moreMore than £73bn was wiped off the value of UK shares last week after fresh falls in the price of copper and other metals was matched by a precipitous fall in the price of oil to below $38. London’s FTSE 100 closed 135.27 points down at 5,952.78 – its lowest level since late September.The index of Britain’s top 100 companies is now about 6.5% below its level at the start of the year, unlike the German Dax 30 and the Paris Cac 40, which are well above.A forecast from the International Energy Agency (IEA) that a glut of crude will persist for another year triggered panic selling among investors, already concerned that an interest rate rise will potentially destabilise the global economy.The Bank of England is expected to delay a rise in rates following a string of weak inflation figures. Official figures on Tuesday are expected to show that falling oil prices and intense competition among food retailers kept inflation near zero in November, adding to a year of flat average prices.Several Threadneedle Street policymakers have warned that the UK needs to begin raising rates to choke off cheap personal credit and rampant house price rises.Unemployment data on Wednesday is expected to show a further strengthening of the employment rate, which is already at a record high, though skills shortages in some areas of the economy are likely to limit the extent of new hiring, according to some analysts.A business barometer by Lloyds Bank showed that November saw growth in activity across all regions in England and a solid expansion in Wales. The Lloyds Bank regional purchasing managers’ index (PMI) found that employment rose across most regions, although the pace of job creation eased.The fastest overall growth was in the east of England and in London, where a flood of new business fuelled robust rates of expansion. The survey found that the north-east returned to growth after a fall in October. “However, like the north-west, it underperformed compared to the national average,” it said.The stories you need to read, in one handy emailRead moreBut surveys of high street retailers have found that shoppers remain nervous of spending the higher wages they received this year, preferring to hunt for bargains. The British Retail Consortium (BRC) and Springboard measure of footfall in November was 2.1% lower than a year ago, with high streets and shopping centres suffering declines of 3.4% and 2.8% respectively.The BRC said only retail parks succeeded in attracting customers, while high streets were hurt by the online buying frenzy on Black Friday. Only two regions reported positive footfall growth in November: the east Midlands and Greater London.Recent declines in manufacturing and construction output have also indicated that keys parts of the economy are struggling, leaving only the services sector to maintain GDP growth.Shaw said it was likely that the UK’s first rate rise since the financial crash would take place next summer, but several analysts have argued that low inflation and tepid growth will prevent the Bank of England from following the Fed until late next year.
As seen on The Nation:
Janet Yellen, the first woman to chair the awesomely powerful Federal Reserve, reminds us of a wicked one-liner made famous by Clare Boothe Luce and Oscar Wilde. “No good deed goes unpunished.” Yellen, who has been trying to do the right thing, bravely defied the conventional opinion of hard-money conservatives. But the Fed chair sets up the central bank to be the convenient political goat if her decision to raise interest rates turns out to be wrong.The Fed has often played bad guy in managing the national economy and the world’s. As one former chairman put it, central bankers “take away the punch bowl just when the party gets going.”Yellen did so too. But this episode is utterly upside down. The Yellen Fed raised its key interest rate only a tiny bit, in order to demonstrate its confidence in the US recovery, not to hinder it. Financial markets went along with the happy gesture and rallied on the event (though all the market gains were erased by the following day).The trouble is, Yellen’s optimism is founded on a shaky premise. The official unemployment rate, now seemingly relatively low at 5 percent, does not reflect the “new normal,” in which millions have simply stopped looking for jobs or are involuntarily underemployed. Furthermore, wages for working people have remained flat or falling. In other words, the economy is still very soggy, despite nearly a decade of easy money with borrowing rates held near zero, thanks to Fed policy. This was a great time for stock-market investors (but not working people), and they have enjoyed the bubble of rising share prices while it has lasted. Yellen wants to restore “normal,” but the question is, for whom?Now that it’s raised the federal funds rate for the first time in almost a decade, the Fed has to manage the downside risk—the risk of undercutting the struggling recovery—and that may prove to be far more treacherous. The US economy looks healthier, but it exists in a world economy that is still threatened by deflation—falling prices, slowing growth, and vulnerable debtors. We are still in the era of deleveraging—still working off the false enthusiasms that led to the financial crash of 2008. Once again, the United States is playing locomotive, but the United States itself is a weakened, chastened engine.Yellen’s wishful posture is doubtless grounded in hard facts and sincere convictions. Nevertheless, she will be blamed by both the right and the left if the economy does not fulfill her hopes. The central bank might once again become the fall guy for economic failure, though the blame should rightly be shared with elected politicians, Republicans and Democrats.It does seem unfair that the Federal Reserve may be punished by events when it alone was trying to do the right thing during the crisis by stimulating economic growth with cheap credit. Meanwhile, the elected sides of government—the president and Congress—were obsessed with the wrong-way objective of reducing federal debt and spending. With few exceptions, politicians of both parties were re-fighting an old ideological battle. That is, they were pulling in the opposite direction from the Fed, guaranteed to make things worse if they succeeded.As a longstanding critic of the central bank’s conservative biases, I found myself in the odd circumstance of leading cheers for the Fed. For several years under Ben Bernanke, and then again under Janet Yellen, Fed governors discreetly implored the elected politicians to intervene with aid to reduce the mountain of failed mortgage debt or adopt easier terms for debt forgiveness. Neither the Obama White House and Treasury nor Republican leaders in Congress were willing to respond in meaningful ways.
As seen on CNN Money:
U.S. stocks rallied as investors cheered the Federal Reserve's historic decision to raise interest rates for the first time since 2006. The move represents a major vote of confidence in the American economy's recovery from the Great Recession, which caused the Fed to slash rates to zero for the first time ever.The market gathered momentum after Fed chief Janet Yellen reassured Wall Street during a press conference that the Fed will be very gradual about further rate hikes.The Dow jumped 224 points, while the S&P 500 and the Nasdaq advanced about 1.5% apiece. The S&P 500 also returned to positive territory on the year.The sizable gains were a sign that Wall Street was more than ready for the Fed to remove its emergency support. The move also reduces uncertainty about Fed policy."The markets are happy because the Fed is telling us the economy is on the right track. We're no longer in crisis mode," said Kristina Hooper, U.S. investment strategist at Allianz Global Investors.Yellen said the decision "marks the end of an extraordinary period" of low rates designed to boost the recovery from the Great Recession."The U.S. economy has shown considerable strength," she said.Related: What a Fed rate hike means for youIt's important to remember that interest rates remain extremely low, even after the rate hike. The Fed raised its key rate from a range of 0% to 0.25% to a range of 0.25% to 0.5%.Yellen soothed concerns about higher rates by repeatedly telling investors on Wednesday that the Fed will be "gradual" about future rate increases so as not to kill the economic recovery.The rate hike also eases fears that the Fed was trapped at near-zero rates and would never be able to lift them without causing economic and financial chaos."Very rarely (if ever) have central banks successfully exited the zero bound and quantitative easing; we believe today's U.S. Federal Reserve will ultimately prove the first to do so," Joseph Davis, Vanguard's global chief economist, wrote in a note.Banks cheered the rate hike the loudest, with Citigroup (C), Bank of America (BAC) and Goldman Sachs (GS) rallying 2% each. That's because higher rates will make it easier for banks to charge borrowers more. Almost immediately several big banks like JPMorgan Chase (JPM) announced plans to raise the cost of loans but keep deposit rates the same.But recent junk bond freakout is still a worryStocks are also getting an assist on Wednesday from the junk bond market, which is rebounding after a recent scare. Exchange-traded funds that track the high-yield market, including the SPDR Barclays High Yield Bond ETF (JNK), rose solidly on Wednesday.Oil's recent volatility also looms largeThe junk bond fears are exacerbated by the crash in oil prices, which has caused a wave of energy defaults. Oil plunged nearly 5% on Wednesday to settle at $35.52 a barrel.Junk bond concerns have also risen following the implosion of a mutual fund run by Third Avenue that invested in risky distressed debt.Bonds prepare for higher yieldsThe far safer market for U.S. government debt is also responding to the Fed decision. The yield on the 10-year Treasury note, the benchmark rate for debt, rose to 2.39%, compared with 2.27% the day before.Shorter-duration bonds are more likely to experience a jolt from a rate hike. The one-month Treasury-bill yield rose to 0.22%, its highest level since 2009.Will dollar strengthen even more?After a terrific 2015, the U.S. dollar didn't move much after the Fed decision. The euro was changing hands at about $1.09. That's a dramatic decline from $1.25 a year ago, but better than $1.06 just last month.The relatively strong U.S. economy along with the anticipation of higher interest rates has allowed the dollar to strengthen significantly against rival currencies this year. The question is: will the dollar keep gaining against other currencies once rates go higher?
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