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.
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