Markets took a day away from their fixation on oil to their normal fixation on the Fed. Indexes were locked in a quite tight range most of the day, until the Federal Reserve announcement – at which time they sold off. This is a big departure for much of the past 6-7 years where almost no matter what the Fed said or did markets rallied. The S&P 500 fell 1.09% while the NASDAQ sunk 2.18% as Apple (AAPL) is a major weight in that index. As for the Fed, I said when they raised rates they were probably a few years too late and it seems more likely that within a year they would be cutting rates again, or heck in full quantitative easing mode again so we’ll see if that is correct by December 2016.
As widely expected, the Federal Reserve left rates unchanged in its post-meeting statement Wednesday. The central bank said it is “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.” “The makers of monetary policy were not as dovish as the markets would have liked to see, although the committee did include that they are monitoring global economic and financial developments, said Steven Ricchiuto, chief economist at Mizuho Securities. “However they also maintained the notion that the things keeping inflation from returning to their 2% target are transitory.”
Fed Chair Janet Yellen is scheduled to hold her semi-annual testimony before Congress in about two weeks. If the markets don’t reverse up by then, I’d expect a lot of happy talk from Janet as the Fed has somehow made inflating stock markets part of their mandate.
In economic news, new home sales jumped to a seasonally adjusted annual rate of 544,000 from an upwardly revised November figure of 491,000.Continue reading