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14Dec2016 Market Close: DOW Closed Down Triple Points, Gold Fell To 1140, Crude Prices Fall And The US Dollar Rises Sharply After Fed Raises Rates

Written by Gary

U.S. stocks fell today (SPY -0.6%) after the Fed's raised interest rates by a quarter point and signaled hikes could come at a faster pace than some expect. This increase was only the second since 2006; the first was last December when the central bank raised rates by the same margin. The dollar shot higher and WTI crude settled in the high 50 handle.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Fed lifts rates, sees faster pace of hikes in Trump's first year

WASHINGTON (Reuters) - The U.S. Federal Reserve raised interest rates by a quarter point on Wednesday and signaled a faster pace of increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation.

Wall Street falls after Fed rate hike

NEW YORK (Reuters) - U.S. stocks fell on Wednesday after the Federal Reserve raised interest rates by a quarter point and signaled hikes could come next year at a faster pace than some expected.

U.S. IPOs set to rebound after dismal 2016

(Reuters) - The U.S. IPO market is expected to bounce back next year after a forgettable 2016, fueled by a sunnier economic outlook and a bit more certainty following the presidential election - factors that encouraged the Federal Reserve to hike interest rates.

Trump meets Silicon Valley elite after mutual mistrust in campaign

NEW YORK (Reuters) - U.S. President-elect Donald Trump and some of Silicon Valley's most powerful executives met at his Manhattan tower on Wednesday, a summit convened to smooth over frictions after both sides made no secret of their disdain for each other during the presidential campaign.

Exxon says CEO Tillerson to hand over reins to President Woods

(Reuters) - Oil major Exxon Mobil Corp said on Wednesday that President Darren Woods would become chief executive and chairman in January after the retirement of Rex Tillerson, who is U.S. President-elect Donald Trump's pick for secretary of state.

GE sees higher 2017 operating profit, sticks to 2018 EPS target

(Reuters) - General Electric Co said on Wednesday that it expected 2017 operating earnings between $1.60 and $1.70 a share, and stuck to its 2018 earnings forecast of $2 per share.

Goldman names Solomon, Schwartz as Cohn's successors

(Reuters) - Goldman Sachs Group Inc promoted company veterans David Solomon and Harvey Schwartz as presidents and co-chief operating officers on Wednesday, setting up the two men to compete to replace Chief Executive Officer Lloyd Blankfein.

Barclays sees early U.S. rate increase unlikely

NEW YORK (Reuters) - The U.S. Federal Reserve is unlikely to raise short-term interest rates in early 2017 if the U.S. economic expansion slows and the Trump administration introduces tariffs that would hurt American exports, Barclays economists said on Wednesday.

Caesars unit's bank lenders need more time to resolve dispute: lawyer

CHICAGO (Reuters) - Bank lenders of Caesars Entertainment Corp's bankrupt operating unit need more time to resolve a dispute over the terms of their recovery, a lawyer said in court on Wednesday.

Harvard Professor Says He's Rallied Nearly Enough GOP Electors To Block Trump

Harvard University law professor Larry Lessig, who has been providing free legal counsel to "faithless electors" from the GOP considering voting against Trump, claims that 20 GOP Electoral College voters have contacted him and are seriously considering flipping their vote. Of course, with 306 Electoral College votes assigned to Trump, it would only take 37 faithless GOP electors to block his presidency and push the election to Congress to decide. Per Politico:

Lessig's anti-Trump group, "Electors Trust," has been offering pro bono legal counsel to Republican presidential electors considering ditching Trump and has been acting as a clearinghouse for electors to privately communicate their intentions.

"Obviously, whether an elector ultimately votes his or her conscience will depend in part upon whether there are enough doing the same. We now believe there are more than half the number needed to change the result seriously considering making that vote," Lessig said.

Meanwhile, the list of Democrat electors demanding an intelligence briefing on Russian interference in the election prior to casting their vote continues to grow. As of last night we noted that 40 democrats had signed the petition and, as of this morning, the list has grown to 55. Not surprisingly, the list is loaded with disaffected Hillary supporters from Democratic strongholds like California and Virginia.

Evercore: "More Hawkish Than Expected Fed" Leaves Markets Behind The Curve: 2Y/USD Headed Higher

While Goldman was mostly delighted with the Fed's statement, Evercore ISI is far less sanguine about what the Fed revealed today,

More hawkish than expectations...investors we have talked to understood that the "supertanker" that is Fed policy was likely to turn, but was more likely to wait in forecasting a faster pace of rate hikes until till the new administrations fiscal policy plans became clear. Since the Fed did not even wait to raise the DOT plot until fiscal plans became clear, will the reality of tax-cut fiscal policy increase the DOT's even further at some point?

Market expectations for rate hikes are still behind the Fed. With German 2yr rates -0.72% and the U.S. 2yr making very little sense at 1.2 if the Fed funds rate is going to be above 2% in 2018, upward pressure on the USD should persist.

Janet Yellen Explains How Dovish Her Rate Hike Is - Fed Press Conference Live Feed

Just as Mario Draghi exlained how his reduced bond buying was not a taper, we suspect the narrative espoused by Janet Yellen in her press conference today will be just how dovish this rate hike is.. and how the rate of normalization will be very gradual. The big question is, how will she respond to question about Trump's fiscal stimulus plan? Of course, this also may be her last flourish as Fed head, so anything goes.

The following is an excerpt of Federal Reserve Chairman Janet Yellen's opening statement at her press conference following Wednesday afternoon's Federal Open Market Committee statement:

We expect the economy will continue to perform well, with the job market strengthening further and inflation rising to 2 percent over the next couple of years. I'll have more to say about monetary policy shortly. But first, I'll review recent economic developments in the outlook. Economic growth has picked up since the middle of the year. Household spending continues to rise at a moderate pace, supported by income gains and by relatively high levels of consumer sentiment and wealth. Business investment, however, remains soft, despite some stabilization in the energy sector.

Overall, we expect the economy will expand at a moderate pace over the next few years. Job gains, averaged nearly 180,000 per month over the past three months, maintaining the solid pace that we have seen since the beginning of the year. Over the past 7 years, since the depths of the great recession, more than 15 million jobs have been added to the U.S. economy. The unemployment rate fell to 4.6 percent in November, the lowest level since 2007, prior to the recession. ...

Fed Gets Ahead of the Market, and Maybe Donald Trump

There is plenty of uncertainty about President-elect Donald Trump's tax-cut and spending plans, but the Fed can't afford to wait and see what form they will take.

Financials Are Cheap, Even After the Rally

Financial stocks could have room to rise further are interest rates keep climbing.

The Key to a More Hawkish Fed: Inflation

The Fed's outlook on interest rates might not be hawkish enough if inflation continues on its recent trajectory

14 December 2016 FOMC Meeting Statement: Federal Funds Rate Raised (Finally)

Econintersect: The Federal Open Market Committee (FOMC) - the board of directors of the Federal Reserve again did raised the federal funds rate. There were no dissenting votes. A summary of how the members viewed the economy:

.... economic activity has been expanding at a moderate pace since mid-year. Job gains have been solid in recent months and the unemployment rate has declined ...

The Wall Street Journal: Trump tells tech leaders his goal is 'to help you folks do well'

President-elect Donald Trump struck a conciliatory tone at the start of a high-profile meeting with top tech executives Wednesday, telling the Silicon Valley leaders that his goal is "to help you folks do well."

Currencies: Dollar index hits 13-year highs after Fed hikes rates, upgrades outlook

The dollar shot higher Wednesday after the Federal Reserve raised its key lending rate by a quarter percentage point and upgraded its outlook for the next year.

Market Snapshot: Stock market ends lower as Fed points to 3 rate hikes in 2017

U.S. stocks ended a volatile session lower on Wednesday, as investors grappled with the prospect of a faster pace of rate hikes in 2017 than had been previously forecast.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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