Raise in Rates Adds Interest to Stock Indices

December 15, 2016 9:32AM CST

The benchmark stock indexes closed in the red on Wednesday after the Federal Reserve signaled that rates will be increased at a quicker pace next year when the economy is strong enough to sustain it. This in turn increased market uncertainty and weighed on investors sentiment. The central bank raised key interest rates in its two-day policy meeting that ended yesterday, and indicated that the rates might be increased further over the coming years. Additionally, rising domestic crude inventories sparked oil to push lower on a fear of an oversupply.

Fed Chairwoman Janet Yellen said that rise in rates “should be understood as a reflection of confidence in economic progress” and Fed’s judgment that “that progress will continue.” Further, the Federal Reserve meeting expressed three rate increases next year, higher than the previously projected two rate hikes in the September meeting. The statement caught investors by surprise and weighed on broader markets.

Traders need to be cautious going into the end of the year. The end of year rally could start to flatten over the last 2 trading days and start the New Year into a push lower. Look a few months out in March, close to the money. I expect the stock market to be down fairly strong in January, so consider positioning your trades to catch the move.

Emini Weekly

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.