Less than 24 hours after the Federal Reserve raised interest rates by a quarter percent, the U.S. stocks opened higher late in December of 2015, for a fourth session of gains. This marked a three-day streak while oil prices were at their lowest in seven years.
A Decade-Long Streak of Low Interest Rates Ended With the Fed's Approval
This was the first time in over ten years that the Federal Reserve lifted the interest rates. Analysts say that this is a market indicator of confidence in the current U.S. economy. The weakness in high yield bonds and oil markets was displayed in materials and energy sectors, which made multi-session losses.
The junk-bond market is still at the forefront of the market's mind as the ETF was revealed to be down 11% year to date. But the recent increase in benchmark interest rates has been unprecedented since the beginning of the Great Recession when car title loans were on the rise and ultra low pricing was the only option in such a severe economic climate.
Oil and Manufacturing Markets Waver as Other Markets Grow Stronger
But the crude oil market might bring a halt to the stocks opening higher. Oil prices fell to below $35 a barrel, and investors who had previously relied on the ever-expensive price of oil took wary notice. Randy Frederick, managing director of Schwab Center for Financial Research says that he believes that, "it's going to be hard for the markets to continue to move higher if oil is sinking. We need stabilization of oil. We don't need to see much to the upside, just stabilization."
Jennifer Ellison, principal at Bingham, Osborn & Scarborough was watchful. "Today's losses have taken the air out from the Santa Claus rally, as investors are not feeling positive, given the continued weakness in oil markets and troubles in high-yield bonds," Ellison said.
Whether or not the markets continue on their upward trend will be dependent on oil prices over the next few weeks. Even in Philadelphia, a historically strong manufacturing presence in the U.S, activity fell into the negatives. But while manufacturing markets lag, labor markets are still going strong.
Unemployment Rates Decrease and the Labor Markets Improve
The number of Americans who are applying for unemployment benefits is also dropping, further bolstering the labor markets and improving the economy. The U.S. leading economic index also rose recently, gaining 0.4% in November to reach 124.6.
Throughout the rally, The Dow Jones Industrial Average DJIA, -2.39% dropped 253.25 points, or 1.4%, to close out at 17,495.84 points. The Nasdaq Composite COMP, -2.74% also fell by 68.58 points, or 1.4%, to finish the day at 5,002.55. Nine out of the ten main sectors saw significant losses. Only utilities closed out higher by 0.1%.
The U.S. dollar is still climbing its way back up in value. The ICE dollar index DXY, +0.14% went up significantly; more than 1.4% to 99.1930 points.