Your Wednesday Market Blip 11/16/15

Your Wednesday Market Blip 11/16/15

The Federal Reserve raised the Fed Funds interest rate by 0.25% in a unanimous decision today. The range went from zero to .25% to .25% to a half point. In her presser Fed Chair Janet Yellen said the hike was needed but that going forward it will be a “gradual” process since the economy is still sluggish. Banks immediately upped their prime rates in response and the markets liked the news because the word “gradual” was seen as dovish. Janet was able to pull off the rare coup of looking dovish while being hawkish. The Dow closed higher on the day gaining 224 points on heavy volume to close at 17,749. The “VIX” or volatility index (aka “fear index”) fell sharply.
Congress last night passed some type of budget deal that, while no one really knows all the details, contained two important energy amendments. One was an extension of the tax credits for wind and solar and the other was a repeal of the 40 year old ban on oil exports. Solar stocks shot higher on the news while shares of oil related companies were little changed. The removal of the oil export ban will allow US shale producers to go toe to toe with OPEC.
The Commerce Department reported that home builders broke ground at an annualized rate of 1,173,000 units last month which represented an increase of 10.5% from October. Single family home construction was up 7.6% while apartment construction was up 18.1%. Building permits, a sign of future activity, was up 11% from the prior month and single family permits rose 1.1% to the highest level since December 2007. I guess this all says that housing is doing ok.
Oil prices were whacked on the rate hike news as the US dollar strengthened. WTI crude fell over 4% and traded back below $36. Besides a stronger dollar oil was pushed lower by a stockpile report showing a surprise increase instead of a decrease that had been predicted by the oil gurus.