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Dow briefly jumps 150 after Fed raises rates

US stocks traded higher Wednesday, amid pressure from low oil prices, after the Federal Reserve raised rates for the first time in nearly a decade.

“You have to be very mindful of what they say in the press conference coming up,” said Tom Siomades, senior managing director and head of Hartford Funds Investment Consulting Group.

“I think the market heard what it wanted to hear and that should bode well here for ’15 and the first month of ’16,” he said.

Fed Chair Janet Yellen held a press conference following the Fed statement release.

The Dow Jones industrial average traded about 100 points higher after briefly adding 150 points, with Nike contributing the most to gains. The Dow added as much as 165 points in morning trade, prior to the Fed’s decision.

Utilities continued to lead S&P 500 advancers, while energy lagged. The S&P 500 briefly attempted to hold in positive territory for the year.

Treasury yields traded steady, off session highs, while the US dollar index spiked before turning a touch lower after the Fed decision. The euro traded near USD 1.09.

Oil traded lower Wednesday after two days of recovery from near-seven-year-lows. US crude oil futures settled at USD 35.52 a barrel, down USD 1.83, or 4.90 percent.

The US central bank was widely expected to raise the fed funds rate by a quarter point Wednesday, while emphasizing that the pace of tightening will be gradual. The hike was the first since June 2006.

It’s “really important for all of us investors and media not to overreact to the first ten minutes of trading,” said LPL Financial Investment Strategist and Economist John Canally, who is keeping an eye on currencies and emerging market ETFs.

The iShares MSCI Emerging Markets ETF (EEM) jumped more than 1 percent, but is still down more than 15 percent year-to-date.

Sharon Stark, managing director and fixed income strategist at D.A. Davidson, expected Treasury yields to stay in a range, unless the Fed was more hawkish than markets anticipated.

With about half an hour to the Fed decision:

Energy was off about 0.7 percent after briefly falling more than 1.5 percent as the greatest laggard in the S&P 500. Utilities led advancers in the S&P 500, which briefly swung into positive territory for 2015 in intraday trade.

Treasury yields rose, with the 2-year yield hitting 1 percent for the first time since May 2010. The 10-year yield held around 2.30 percent.

“I just think the market is getting prepared here for a rate hike. … Or this could be, buy the rumor, sell the fact, kind of thing,” said Jeffrey Cleveland, chief economist at Payden & Rygel.

The SPDR S&P Regional Banking ETF (KRE) and SPDR S&P Bank ETF (KBE) both held lower in mid-morning trade.

The Dow Jones industrial average struggled to hold higher after earlier rising 165 points, with Goldman Sachs one of the top contributors to gains.

“Often before big announcements we tend to drift towards unchanged,” said JJ Kinahan, chief strategist at TD Ameritrade. “The whole market may be unchanged on everything because no one wants to take on more risk.”

DuPont, Apple, Chevron and Exxon Mobil were the greatest weights on the Dow in midday trade. In addition to some negative headlines around Apple products Wednesday, UBS lowered its target price on the stock and Credit Suisse lowered estimates, according to StreetAccount.

The Dow transports traded about half a percent higher after earlier rising more than 1 percent.

“Basically the market’s looking to add on to yesterday’s rally and the market’s already discounted a rate hike and the key for today’s FOMC move is going to be the economic forecast,” said Peter Cardillo, chief market economist at First Standard Financial. “I think what happened in the last two days is basically market action that suggests the previous decline was not due to fears of the Fed but options expiration.”

Trading has been volatile in the last several days as traders weighed sharp declines in oil prices, seasonal tax-loss selling and anticipation ofquadruple witching expiration Friday as the year-end approaches.

Other commodities traded mixed, with copper and gold higher but natural gas near lows not seen in more than a decade.

Read MoreOil at USD 100? ‘Outrageous’ forecasts for 2016

In economic news, housing starts rose 10.5 percent in November, while building permits rose 11 percent. Mortgage refinances rose 1 percent on rate fears.

US industrial production saw its sharpest decline in more than three and a half years in November as utilities dropped sharply, a sign of weakness that could moderate fourth-quarter growth. Industrial output slipped 0.6 percent after a downwardly revised 0.4 percent dip in October, the Federal Reserve said in a Reuters report Wednesday, marking the third straight month of declines. Capacity utilization was 77.0 percent.

December Flash Manufacturing PMI fell to from November to 51.3, the weakest improvement in manufacturing sector business conditions in three years, Markit said.

The US dollar was mildly lower against major world currencies, with the euro near USD 1.094 and the yen at 121.79 yen against the greenback as of 1:28 p.m.

“People have priced in the quarter-point move but what they haven’t priced in is what’s next and that’s what people are waiting to hear — … what is (Yellen) going to say for 2016?” Kinahan said.

Global equities rallied ahead of the Fed decision, with Japan’s Nikkei 225 closing up 2.6 percent and European stocks paring gains but ending higher.

US stocks closed higher Tuesday, supported by stabilization in oil prices and high expectations for the first rate hike in nine years.

The major US averages were on track for weekly gains of about 1.5 percent or more, as of 1:33 p.m., ET.

With about half an hour to the Fed announcement, the Dow Jones industrial average traded up 34 points, or 0.2 percent, to 17,558, with Coca-Cola leading advancers and DuPont the greatest laggard.

The S&P 500 traded up 7 points, or 0.36 percent, at 2,050, with utilities leading seven advancers and energy the greatest decliner.

The Nasdaq composite rose 12 points, or 0.24 percent, to 5,007.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 20.

About two stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 425 million and a composite volume of about 2.2 billion in early afternoon trade.

Crude oil futures for January delivery fell USD 1.57 to USD 35.78 a barrel on the New York Mercantile Exchange. Gold futures gained USD 15.50 to USD 1,077.10 an ounce as of 1:27 p.m.


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