Small-Cap ETFs And Gold Make Bullish Moves As Fed Rate Hike Arrives

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[ibd-display-video id=449449]The major stock index ETFs traded higher Wednesday afternoon following the much-anticipated arrival of a March rate hike and a bounce in oil prices .

Small-caps led, as investors interpreted the rate increase as a Federal Reserve vote of confidence in the economy. The tempered tone of the Fed message on the future pace of rate hikes also reassured the markets.

The small-cap iShares Russell 2000 ( IWM ) jumped 1.6% and closed at session highs after the Fed decision. In a bullish move, it pierced above the 50-day moving average, a gauge of technical strength, for the first time in five days.

In a recent note, strategists at BlackRock, one of the world's largest investment managers, credited the central bank for managing the rate-hike scenario without roiling the markets and creating volatility.

"Why are markets unfazed?" added BlackRock's Richard Turnill on March 13. "It's a sign of confidence the U.S. economy can now stand on its own two feet with less monetary accommodation, we believe."

Domestically focused small-cap stocks could especially benefit from that brightening outlook at home.

The largest ETFs investing in commodity gold and gold stocks also rose sharply, extending the morning's advance, after the Fed raised rates for just the third time in 10 years.

[ibdchart symbol="gld" type="daily" size="quarter" position="leftchart" ]

SPDR Gold Shares ( GLD ) finished 1.9% higher on the stock market today. That move improved upon a 0.2% gain earlier in the session. It came as gold bugs digested the Fed statement, which comfortingly did not signal a faster tightening pace .

"The FOMC statement was arguably a bit hawkish, but maybe not as hawkish as many expected, indicating there will be three U.S. interest rate increases this year, including the one just announced," Jim Wyckoff on Kitco News wrote in a note. "The fed funds rate range now stands at 0.75% to 1.0%."

VanEck Vectors Gold Miners ( GDX ) vaulted 7.7% into the close, also building on a 1.2% gain early Wednesday.

Rising rates tend to put downward pressure on gold, which bears no yield. But besides the tone of the Fed message, uncertainties tied to elections in Europe are helping to boost the safe-haven asset today.

The SPDR Gold ETF peeked above resistance at the 50-day moving average - a measure of technical strength - after the rate hike. It is now up 1.3% on the week so far, but sits 11% below the July high of 131.15.

Its gold mining peer now looks poised to snap a four-week slump.

ETFs that track the S&P 500, Dow Jones industrial average and Nasdaq-100 saw a noticeable pop after the Fed decision.

Energy led the advance in the S&P 500 in midday trading.

Energy Select Sector SDPR ( XLE ) powered up 2.2% on a recovery in oil prices from a seven-day slide. Reports of a drawdown in U.S. stockpiles helped crude oil bounce back.

SDPR S&P 500 ( SPY ), a proxy for the market, added 0.8%.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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