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Stock Market News for December 17, 2015

Benchmarks ended higher on Wednesday after the Fed policy makers unanimously voted to raise interest rates, which has been stuck at zero for almost a decade. The hike in the federal funds rate was looked as a dovish hike, but the Fed emphasized on gradual rate increases.

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The Dow Jones Industrial Average (DJI) gained 224.18 points or 1.3% to close at 17,749.09. The Standard & Poor's 500 (S&P 500) advanced 1.5% to close at 2,073.07. The tech-laden Nasdaq Composite Index closed at 5,071.13, increasing 0.4%. The fear-gauge CBOE Volatility Index (VIX) plummeted 14.8% to settle at 17.86. A total of around 8.6 billion shares were traded on Wednesday, higher than the last 20-session average of 7.2 billion. Advancers outpaced declining stocks on the NYSE. For 81% stocks that advanced, 18% declined.

Benchmarks extended gains for the third straight session on Wednesday after the Federal Reserve raised its key interest rate for the first time in nearly a decade. The Fed said that the U.S. economy will continue to do well and a slight increase in rate was appropriate. Yellen said that "the Fed's decision today reflects our confidence in the U.S. economy".

She added: "We believe we have seen substantial improvement in labor market conditions and while things may be uneven across regions of the country, and different industrial sectors, we see an economy that is on a path of sustainable improvement". Separately, on inflation, Yellen said: "We really need to monitor over time actual inflation performance to make sure that it is conforming, it is evolving, in the manner that we expect". Nevertheless, the Fed's move to raise rates pointed to "solid" consumer spending, rebound in housing market and strong business fixed investment.

The Fed increased its short-term borrowing rate to a range of 0.25% to 0.50%. Fed policy makers unanimously voted in favor of a rate hike. Separately, the policymakers forecasted the rate to move up to 1.375% by the end of 2016. Meanwhile, the Fed stressed that the pace of rate hikes will be 'gradual' in nature.

Defensive stocks including utility stocks rallied the most in nine months on Wednesday, banking on the Fed's signal that the rate hike was a tentative beginning to a "gradual" tightening cycle. Moreover, the Fed's move to raise rates was widely telegraphed and most of its response has been priced in.

The Utilities Select Sector SPDR (XLU) advanced 2.5% and was the biggest gainer among the S&P 500 sectors. Key stocks from the sector including NextEra Energy, Inc. ( NEE ), PPL Corporation ( PPL ), Duke Energy Corporation ( DUK ), Edison International ( EIX ) and Southern Company ( SO ) increased4.9%, 1.7%, 1.7%, 2.1% and 2%, respectively.

Separately, the Homebuilders ETF (XHB) was the second biggest gainer, increasing 2.2%. Key stocks from the sector including KB Home ( KBH ), Lennar Corporation ( LEN ), DR Horton Inc. ( DHI ), PulteGroup, Inc. ( PHM ) and NVR, Inc. ( NVR ) advanced 3.4%, 2.6%, 2.5%, 3.6% and 0.5%, respectively. Overall, Wednesday's gains were broad based, with 11 out of 12 sectors of the S&P 500 ending in the green.

In economic news, the Board of Governors of the Federal Reserve System reported that industrial production fell 0.6% in November after decreasing 0.4% in October. The decline was wider than the consensus estimate of a decrease by 0.2%. Separately, capacity utilization decreased to 77%, as against consensus estimate of 77.4%.

Separately, the U.S. Department of Commerce reported that building permits surged 11% from October to a seasonally adjusted annual rate of 1,289,000 last month, hitting five-month high. It was also higher than the consensus estimate of 1,155,000. Additionally, housing starts soared 10.5% last month from October to a seasonally adjusted annual rate of 1,173,000, beating the consensus estimate of 1,143,000.

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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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