The Fed’s policy decision is sending shock waves through financial markets.
But it’s not the first rate hike
of 2017 that’s got the dollar tumbling and Treasuries rallying with
equities. Instead, markets are reacting to Federal Reserve officials’
forecast that rates will rise three times this year, which is in line
with its outlook from December. Some investors had thought policy makers
might change it to four increases.
“The markets are excited --
bonds, stocks, gold and everyone short the dollar -- because the Fed
didn’t change their dot plot and thus remain on pace with 3 hikes this
year in total,” said Peter Boockvar, chief market analyst at The Lindsey
Group LLC. “The Fed reminded us all of the gradual nature of their
expected behavior on this rate hike cycle.”
Investors anticipated the tightening. In fact, Treasury
yields had climbed with the dollar on speculation the central bank might
signal a faster pace. But those trades unwound quickly Wednesday
afternoon.
Here’s a look at the markets seeing some of the biggest moves:
Stocks
The
S&P 500 Index rallied to its highest level of the session on the
back of the Fed’s announcement and is holding on to its gains.
Treasuries
The yield on 10-year Treasury notes fell 9 basis points to 2.51 percent, erasing gains made over the past week.
Dollar
The U.S. Dollar Index tumbled to the lowest level since Feb. 20 on the back of a dovish outlook from the Fed.
Gold
The weaker dollar is helping commodities like gold. The precious metal is up more than 1 percent following the announcement.
Bloomberg by Brian K Sullivan Another wave of tornado-spawning thunderstorms is set to rip across the Great Plains and South this week, putting the U.S. within reach of a record year for life-threatening twisters. Severe storms will drench a swath of the country from Texas to Mississippi over the next five days, according to the U.S. Storm Prediction Center. Through Thursday, 369 tornadoes have been reported across the country, the most in five years and more than double the normal number of sightings. An active jet stream and unusually balmy weather are to blame for the burst of deadly tornado activity, the storm prediction center said. Strong winds have dragged storms into the warm, humid air that’s blanketed the eastern half of the nation, creating conditions ripe for a weather phenomenon that leads to at least $400 million in damage a year in the U.S. “We have a severe threat starting today and continuing for each of the next five days through at least Monday
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The market hates surprises, especially when the surprise comes from a central bank. Last week, the European Central Bank (ECB) unexpectedly reversed course and took a more accommodative stance on monetary policy in an effort to encourage stronger European economic growth. Tom Fairless of Barron’s explained: “Officials are seeking to shore up an economy that has been rattled by shocks ranging from a slowdown in China to mass protests in France and bottlenecks in Germany’s crucial auto industry. They are threading a careful path between providing sufficient support for the region’s softening economy while avoiding any appearance of panic, which could ricochet through financial markets.” The Eurozone isn’t the only region feeling the pinch of weaker economic growth. China’s exports were down more than 20 percent in February, reported Investing.com . Analysts had expected a decline of about 5 percent. Concerns about the health of China’s economy have been growing since the p
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