Fed Hikes Rate After Nine Years

Nichole Harper
16 Dec, 2015
New York City

Stocks on Wall Street gyrated but markets remained calm after the U.S. Federal Reserve raised interest rate for the first time in nine years. The increase of 0.25% is expected to be followed by additional but gradual increases. Crude oil dropped more than 3% and natural gas fell to 16-year low.

[R]2:15 PM New York City, New York – Stocks on Wall Street gyrated but markets remained calm after the U.S. Federal Reserve raised interest rate for the first time in nine years. The increase of 0.25% is expected to be followed by additional but gradual increases. Crude oil dropped more than 3% and natural gas fell to 16-year low.[/R]

Stocks opened higher in New York trading but pared gains in the early afternoon ahead of the Fed decision this afternoon.

The widely watched Fed decision on the rate was welcomed by Wall Street with calm and investors shifted to the focus on the next Fed moves.

Federal Reserve raised its key lending rate by 0.25% from its near zero rate target and reaffirmed the gathering strength in the labor market and widening economic activities but cited ongoing geopolitical concerns.

To the date, seven years ago the Fed lowered its interest rate to near zero and cited weakening economic conditions and faltering financial markets.

The Fed lowered rates to near zero on Dec 16, 2008 and said rates would remain “exceptionally low” and the central bank was vague on how long the rates will be low but only said “for some time.”

Housing starts in November rose 10.5% to 1,173,000 annual rate from the revised October estimate and surged 16.5% from a year ago month rate of 1,007,000, the Department of Commerce said.

Housing permits in November jumped 11% from the revised October rate and grew 19.5% from a year ago month rate to 1,079,000.

November industrial production slid 0.6% from 0.4% decrease in October. Manufacturing production was unchanged, mining output fell 1.1% and utility output slid 4.3%, the Federal Reserve Bank reported today.

Total industrial production in November slid 1.2% from a year earlier month and total capacity utilization for industry fell to 77%.

On Wall Street, Tollbooth Strategy Index gained 20.89 or 0.2% to 10,851.84.

S&P 500 index jumped 22.21 or 1.1% to 2,044.42 and the Nasdaq Composite Index increased 55.09 or 1.1% to 5,007.32.

Crude oil in New York gained to $36.86 a barrel and gold rose $1.13 to $1,060.99 an ounce.

Earlier in New York trading, crude oil declined $1.50 or 4% to $35.86 a barrel before recovering and natural declined 4 cents to 16-year low to $1.79 per 1,000 cubic feet.

U.S. Movers

Honeywell International Inc ((HON)) jumped 3.9% or $3.86 to $102.33 after the diversified technology company forecasted revenues for the fiscal 2016 to increase between 4% and 6% or $39.9 billion to $40.9 billion and earnings per share in the range of $6.45 to $6.70.

The company reaffirmed its fiscal 2015 estimate for earnings per share of $6.10 per share on revenue of $38.5 billion.

Valeant Pharmaceuticals International, Inc ((VRX)) soared 6.5% to $117.44 after the specialty pharmaceutical products maker lowered revenues forecast for the fiscal 2015 between $10.4 billion and $10.5 billion from previous guidance of about $11 billion to $11.2 billion.

Stock jumped because investors were expecting weaker outlook.

Valeant also revised its adjusted earnings per share forecast for the year in the range of $10.23 to $10.33 compared to earlier estimated range of $11.67 to $11.87.

For the fiscal year 2016, the company forecasted revenues between $12.5 billion and $12.7 billion and adjusted earnings per share in the range of $13.25 to $13.75.

European Markets

European stock markets extended gains for the second day following the market advance in New York and ahead of key interest rate decision later today.

The October trade surplus of the Euro zone rose to €24.1 billion from €22.4 billion a year ago, according to the first estimates of Eurostat.

In the wider EU28 region, the trade surplus dropped to €3.2 billion in October from €6 billion in a year ago period.

Separately, Eurostat reported that the annual inflation rate in the euro zone rose to 0.2% in November from 0.1% in October.

In the EU28 region, annual inflation grew 0.1% in November, compared to being flat in the previous month.

A year ago month, the inflation rate was 0.3% both in the euro zone and the European Union.

In London trading, FTSE 100 index jumped 67.29 or 1.1% to 6,084.40 and in Frankfurt the DAX index increased 110.42 or 1% to 10,558.37.

In Paris, CAC 40 index gained 38.87 or 0.8% to 4,654.53.

AstraZeneca Plc jumped 1.2% to 4,444 pence after the pharmaceutical maker announced the acquisition of the respiratory business of Japan-based Takeda Pharmaceutical Co. for £383 million.

The deal provides AstraZeneca with access a key drug for lung disease.

Additionally, the company will invest up to $100 million for the option to acquire the China-based biological drug manufacturer WuXi AppTec, and will spend $50 million to expand its manufacturing facilities in China.

Barclays Plc increased 0.7% to 216.25 pence after the financial services provider agreed to sell its risk analytics and index solution business to Bloomberg for £520 million.

The sale of the division will result in a pre-tax gain of about £480 million and the transaction is expected to close in the mid-2016.

Asian Markets

The Nikkei 225 average rallied 2.6%, the largest one-day gain in more than two months. Investors returned to add more stock exposure following a rebound in oil and indexes in New York and in Europe.

Tokyo stocks rallied as bargain hunters returned ahead of the U.S. rate decision tomorrow following advances in New York and in Europe.

Dentsu signed two separate agreements to acquire JaymeSyfu Group and Same Same Agency Sas for undisclosed financial terms.

Orix Corp with a consortium signed a contract to take over the operation of two major airports in the Osaka Prefecture for 2.2 trillion yen and Shimamura’s nine-month operating profit increased 4%.

The Nikkei 225 Stock Average jumped 484.01 or 2.6% to 19,049.91 and the broader Topix index gained 38.36 or 2.5% to 1,540.72.

The yen weakened against the dollar to 121.89.

Stocks in Mumbai rebounded and the Sensex index jumped 0.7% in active trading as Asian markets trim weekly losses.

Rupee strengthened 16 paisa to ₹66.76 against one U.S. dollar.

The Sensex Index gained 173.93 or 0.7% to close at 25,494.37. The CNX Nifty increased 50 or 0.7% to 7,750.90.

Stocks in Mumbai edged higher after markets in Asia rebounded in cautious trading as investors anticipate first rate hike in the U.S. since 2006.

HDFC Bank plans to raise up to $450 million through a debenture offering.