The Dow Jones Industrial Average is flat in pre-market hours as investors weigh the U.S. Federal Reserve's decision to increase interest rates. A stronger U.S. dollar is also pressing down on commodity prices.
On Wednesday, the Dow fell 118 points after the Fed concluded its final monetary policy meeting of 2016 and announced it would hike benchmark interest rates. The Dow briefly hit a new intraday record high, but slumped triple digits after the Fed increased its target benchmark range from "0.25% to 0.5%" to "0.5% to 0.75%."
With interest rates on the rise, investors are wondering if the post-election rally is over. But here at Money Morning, we recommend that investors buy stocks now that are able to outperform the market regardless of what the Federal Reserve does with interest rates. That's why we've put together this guide on how to invest after an interest rate hike.
Let's look at the numbers from Wednesday for the Dow, S&P 500, and Nasdaq:
Dow Jones: 19.792.53; -118.68; -0.60%
S&P 500: 2,253.28; -18.44; -0.81%
Nasdaq: 5,463.67; -27.16; -0.50%
Here's a look at today's most important market events and stocks, plus a look at Thursday's economic calendar.
What's Ahead for the Dow Jones Industrial Average Today
The Dow is projecting a one-point gain as investors digest yesterday's historic rate hike. Yesterday, Fed Chair Janet Yellen concluded the December FOMC meeting. Here's what we know after the Federal Reserve's meeting.
- First, the two-year Treasury yield hit its highest level since 2009, and the rate hike is just the second in a decade.
- The FOMC increased its target benchmark range from "0.25% to 0.5%" to "0.5% to 0.75%."
- The Fed says the labor market has continued to strengthen, but it doesn't expect much more improvement. The unemployment rate currently sits at a nine-year low of 4.6%.
- Inflation has increased over 2016 but is still below the committee's 2% longer-run objective. That partly reflects earlier declines in energy prices and in prices of non-energy imports.
- The central bank also hinted toward normalization and said it anticipates three rate hikes in 2017, two or three in 2018, and three in 2019.
- The Fed also increased its economic growth outlook for 2017 from 2.0% to 2.1%.
And what was the impact of the Fed's rate hike?
First up, the U.S. dollar hit new highs as the interest rate increase boosted the value of the currency. That had a negative impact on commodities that are priced in U.S. dollars. Gold prices, silver prices, and crude oil prices all slumped during Wednesday's trading session.
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Natural gas was one of the few exceptions to the dollar's gains as sweeping cold temperatures continue to blanket the Midwestern and Eastern portions of the United States. This cold snap has increased demand for heating fuels.
The WTI crude oil price today is trying to recover from Wednesday's brutal trading session. The rising dollar and concerns about OPEC's global production cuts offset optimistic news that U.S. inventory levels declined by 2.6 million barrels last week. Energy analysts had expected a build of roughly 1 million barrels of crude. Meanwhile, Brent crude gained 0.3% in pre-market hours.
But the big news today is the result of the "Trump Technology Summit" that took place in New York City on Wednesday afternoon. President-elect Donald Trump held a meeting with leadership from companies including Apple Inc. (Nasdaq: AAPL), Microsoft Corp. (Nasdaq: MSFT), Amazon.com Inc. (Nasdaq: AMZN), and Oracle Corp. (NYSE: ORCL). The goal of the meeting was to establish relationships between the new administration and Silicon Valley.
Of course, Trump did take one shot at a technology firm: Twitter Inc. (NYSE: TWTR). He failed to invite Twitter CEO Jack Dorsey and called the company "too small" to participate. However, CNBC has reported that Trump "bounced" Twitter from the meeting after the social media company refused to create a "Crooked Hillary" emoji during the campaign season.
Stocks to Watch Today, Dec. 15, 2016
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- In deal news, shares of Mondelez International Inc. (Nasdaq: MDLZ) added more than 4% on speculation that the company is about to be acquired. According to Bloomberg, Kraft-Heinz Co. (NYSE: KHC) is considering a bid to purchase the global snack manufacturer. Shares of KHC stock were up 1.5% in pre-market hours.
- The recent Yahoo! Inc. (Nasdaq: YHOO) cyber breach is far worse than the one that hammered the company last year. The stock slumped another 3.5% after it said that a breach in August 2013 affected more than 1 billion accounts.
- Shares of ExxonMobil Corp. (NYSE: XOM) are back in focus after the president-elect nominated the company's CEO Rex Tillerson for secretary of state. Shares of XOM stock fell 2.1% during Wednesday's oil slump. The stock is up 0.4% in pre-market hours.
- In earnings news, Sanderson Farmers (Nasdaq: SAFM) added 5.3% in pre-market hours after the company topped Wall Street quarterly expectations.
- Look out for earnings reports today from Oracle Corp. (Nasdaq: ORCL), Adobe Systems Inc. (Nasdaq: ADBE), Jabil Circuit Inc. (NYSE: JBL), Scholastic Corp. (Nasdaq: SCHL), and Quanex Building Products (NYSE: NX).
Today's U.S. Economic Calendar (all times EST)
- Consumer Price Index at 8:30 a.m.
- Jobless Claims at 8:30 a.m.
- Philadelphia Fed Business Outlook Survey at 8:30 a.m.
- Empire State Manufacturing Survey at 8:30 a.m.
- Current Account at 8:30 a.m.
- PMI Manufacturing Index Flash at 9:45 a.m.
- Bloomberg Consumer Comfort Index at 9:45 a.m.
- Housing Market Index at 10 a.m.
- EIA Natural Gas Report at 10:30 a.m.
- Three-Month Bill Announcement at 11 a.m.
- Six-Month Bill Announcement at 11 a.m.
- Five-Year TIPS Announcement at 11 a.m.
- Treasury International Capital at 4 p.m.
- Fed Balance Sheet at 4:30 p.m.
- Money Supply at 4:30 p.m.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.