Fed’s interest rate hike, a cutting edge for U.S. stocks

Fed's interest rate

Stocks in the U.S. ended higher driven by the rebound of oil prices, subsequently when the Federal Reserve had a less intrusive position than predicted; and as expected, the central bank did have an interest rate hike.

The Nasdaq 100 swung higher, aided by the boosting shares of Apple. Semiconductor stocks turned the tables as well by reversing their declines, with the iShares PHLX Semiconductor ETF (SOXX) settling higher by 0.8 percent.

The Dow Jones Industrial average ended at around 110 points after the remarks were released; Caterpillar, UnitedHealth and Johnson & Johnson were responsible for most of the gains.

The Federal Reserve aims a range of 0.75 percent to 1 percent on federal funds rate. Fed President Neel Kashkari was the only one who voted “no“.

Policy makers claimed that they are expecting the health of the labor market to strengthen further and the inflation to be stable at 2 percent in the near term, according to the statement of Diane Swonk of DS Economics.

Right after the release of the statement, Treasury yields declined. The 10-year yield traded lower by 2.50 percent. The 2-year yield fell as well by 1.30 percent. The yield added 1.401 percent in the latest session, its highest since June 11, 2009.

Bryce Doty, senior fixed income manager with Sit Investment Associates, is expecting the decline of yields to be temporary. He added that if Fed lifted rates two times this 2017, a two-year yield hitting 1.32 percent is not feasible.

The dollar index traded lower at around 1 percent at levels that are not visible in more than two weeks. The euro exchanged at around $1.073, while the yen close to 113.4 yen versus the currency.

Meanwhile on the S&P 500, the financial stocks were the leading decliners. With the oil reversing its seven-day losing streak, the energy sector ended up higher at around 2.1 percent. U.S. crude oil futures closed at 2.39 percent at $48.86 per barrel.

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