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The Dow Jones Industrial Average today fell after the U.S. Federal Reserve announced its first interest rate hike since December 2015.
The announcement pushed the U.S. dollar even higher and commodity prices lower. Oil prices slumped and dragged down energy stocks in the process.
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%
Now, here's a look at today's most important market events and stocks, plus a preview of Thursday's economic calendar.
DJIA Today: Dow Hits New Record but Retreats After FOMC Rate Hike
The Dow Jones briefly hit a new intraday record high but retreated after Federal Reserve Chair Janet Yellen announced the central bank would raise its benchmark interest rate. The Fed increased its target benchmark range from "0.25% to 0.5%" to "0.5% to 0.75%."
The rate hike was mostly priced into the market heading into the December FOMC meeting. However, Yellen also said the bank expects three more rate hikes in 2017.
Before we get into how and why the central bank increased interest rates on Wednesday, it's important to have an investment strategy for the road ahead. That's why we've put together this guide on how to invest after an interest rate hike.
So why did the Fed make this decision? With President-elect Trump taking office in January, economic conditions are rapidly changing. The U.S. job market has shown increased strength in recent months, and inflation is ticking upward. In fact, the Fed said that inflation had moved up "considerably" in its statement released this afternoon. The Fed also increased its economic growth outlook for 2017 from 2.0% to 2.1%.
Of course, Trump's economic policies – which include corporate tax reform, a more streamlined income tax code, and significant infrastructure spending – could accelerate both economic growth and inflation in the years ahead.
The Fed's decision to raise interest rates bolstered the U.S. dollar against a basket of international currencies. Gold prices fell below $1,150 per ounce, while silver prices remained flat.
But the bigger impact of the strong dollar was felt among oil traders. Crude oil prices slumped due to a combination of a rising dollar and concerns about a global supply glut. The WTI crude oil price today fell by more than 3% after the Energy Information Administration (EIA) reported rising inventory levels at the key crude hub in Cushing, Okla. It was the sixth straight week of inventory builds at the facility. However, the EIA also reported a total U.S. inventory decline of 2.6 million barrels, when analysts had expected a build of roughly 1 million barrels of crude oil.
Meanwhile, Brent crude dipped 3.5% as traders continue to monitor the progress of OPEC's deal with 12 non-member nations to reduce total output.
While the Federal Reserve's rate announcement in Washington, D.C., dominated Wednesday's headlines, the other big event was happening in Trump Tower in New York City. Today, leaders from Silicon Valley's top technology firms were meeting with President-elect Trump to establish relationships and talk about economic and social policies. Many of the tech giants had backed Trump's rival Hillary Clinton during the 2016 presidential election. Attendees at the "Trump Technology Summit" included leadership from Apple Inc. (Nasdaq: AAPL), Microsoft Corp. (Nasdaq: MSFT), Amazon.com Inc. (Nasdaq: AMZN), and Oracle Corp. (NYSE: ORCL).
Optimism about the president-elect's economic policies has companies around the world committing capital and plans to hire American workers in droves. The latest announcement comes from International Business Machines Corp. (NYSE: IBM). The technology giant – whose CEO Ginny Rometty is now an economic adviser to Trump – has committed to hiring roughly 25,000 workers in the United States and to invest about $1 billion in job training.
There are so many reasons why it's a superb time to invest in healthy American companies that have a global reach. And there's one stock Money Morning Executive Editor Bill Patalon sees as one of the top stocks to buy in 2017. Read about it here.
Top Stock Market News Today, Dec. 14, 2016
- Shares of (Nasdaq: NVDA) remain on an absolute tear, with shares now up more than 190% since Jan. 1. The stock rallied another 6.5% on Wednesday after the company received yet another upgrade from Wall Street. According to a research report from Evercore, the stock has been assigned a new price target of $120 a share. Of course, if investors had been listening to Money Morning Director of Tech & Venture Capital Research Michael A. Robinson, they would have been encouraged to buy the stock when it was a fraction of today's share price. Want to know what the next big technology stock winner will be? Check out Robinson's latest research, right here.
- Smith & Wesson Holding Corp. (Nasdaq: SWHC) has changed its name to American Outdoor Brands Corp. The company says that the change better reflects its diversified and expanding brands. The stock had been one of the top performers over the last eight years as concerns about personal safety, terrorism, and government regulation fueled incredible demand for guns and related equipment. However, with Republicans controlling the White House and both chambers of Congress, the firm is looking for a more diverse source of revenue in the future. Here's more on why the company is making this historic change.
- In earnings news, global manufacturing giant Joy Global Inc. (NYSE: JOY) fell short of Wall Street profit expectations but easily topped consensus analyst estimates. Shares of JOY stock were off slightly in pre-market hours after the company blamed an ongoing commodity price slump for its lackluster report.
- After the bell, keep an eye on earnings reports from Pier 1 Imports Inc. (NYSE: PIR), Apogee Enterprises Inc. (Nasdaq: APOG), Civitas Solutions Inc. (NYSE: CIVI), and Supernus Pharmaceuticals (Nasdaq: SUPN)
- Finally, the holiday shopping season is in full swing, which means it's time to take advantage of the biggest trends this year. And Money Morning guru Tom Gentile encourages you to treat your portfolio to the most lucrative "Christmas stock" out there. Here's Gentile's latest stock recommendation.
Thursday's U.S. Economic Calendar (all times EST)
- Consumer Price Index at 8:30 a.m.
- Jobless Claims at 8:30 a.m.
- PMI Manufacturing Index Flash at 9:45 a.m.
- Housing Market Index at 10: 00 a.m.
- EIA Natural Gas Report at 10:30 a.m.
- 3-Month Bill Announcement 11:00 a.m.
- 6-Month Bill Announcement 11:00 a.m.
- Fed Balance Sheet at 4:30 p.m.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.