Rising rate hike possibilities boosted the dollar to its best settlement in 13 years, which in turn dragged the benchmarks into the red on Friday. Following his victory, it is widely expected that Donald Trump will boost infrastructure spending and cut taxes, which will result in higher interest rates. Moreover comments from Fed Chair Janet Yellen and other key Fed officials also raised chances of a rate hike in December. Additionally, decline in oil prices weighed on investor sentiment. However, all key indexes registered their second straight weekly gains.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) decreased 0.2%, to close at 18,867.93. The S&P 500 also fell 0.2% to close at 2,181.90. Further, the tech-laden Nasdaq Composite Index closed at 5,321.51, losing 0.2%. The fear-gauge CBOE Volatility Index (VIX) fell 3.8% to settle at 12.85. A total of around 6.69 billion shares were traded on Friday, lower than the last 20-session average of 8.02 billion shares. Decliners outpaced advancing stocks on the NYSE. For 51% stocks that declined, 46% advanced.
What Weighed On the Benchmarks?
Rate hike chances gained momentum following expectations that the Trump Presidency will adopt new policies including expansionary infrastructure spending and tax cuts, which raise the chances of a rate hike.
Further, Fed Chairwoman Janet Yellen indicated that chances of a near term rate hike have increased significantly. This led December rate hike expectations to increase further as most traders are now betting on a rate increase next month. As per the FedWatch tool of CME Group, expectations about a hike in December are currently above 90%.
Additionally, several Fed officials’ comments boosted December rate hike prospects. St. Louis Fed President James Bullard said "markets are currently putting a high probability on a December move by the FOMC” and he is now moving “towards supporting that."
Further, Dallas Fed President Robert Kaplan said that the Fed is heading towards increasing interest rates in December. Also, Kansas City Fed President Esther George said the Fed should raise rates "sooner rather than later."
Sooner than expected rate hike chances boosted the dollar. According to Fact Set, the U.S. Dollar Index (DXY) settled at its best level since April 2003. Rising dollar weighed on export-based large-cap companies and eventually on broader markets.
The Health Care Select Sector SPDR (XLV) fell 1.1% and was the biggest decliner among the S&P 500 sectors. Dow components Merck & Co. Inc. ( (MRK - Free Report) and Pfizer Inc. (PFE - Free Report) fell 1.3% and 0.8%, respectively. Both the companies possess a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Moreover, oil prices fell on Friday after Baker Hughes Incorporated reported that U.S. oil rig counts rose from 452 to 471 last week, its biggest increase in 16 months. Both WTI and Brent crude fell 0.8% and 0.7% to $45.07 per barrel and $46.15 a barrel, respectively during the day.
For the week, the Dow, S&P 500 and the Nasdaq advanced 0.1%, 0.8% and 1.6%, respectively. Most of last week’s gains came on the back of encouraging domestic economic data and Fed Chairwoman Janet Yellen’s testimony. Yellen indicated that a rate hike after next month’s policy meeting is definitely on the table.
Stocks That Made Headlines
Abercrombie & Fitch Plunges on Dismal Q3 Earnings
Abercrombie & Fitch Co.’s (ANF - Free Report) shares plunged over 13% on Nov 18, after the company reported dismal third-quarter fiscal 2016 results. ( Read More)
Hibbett Stock Down on Q3 Earnings Miss, View Cut
Shares of Hibbett Sports Inc. (HIBB - Free Report) plunged 10.8% after the company posted dismal third-quarter fiscal 2017 results. (Read More)
Symantec Confirms Buying ID Protector LifeLock for $2.3B
Symantec Corporation (SYMC - Free Report) ) confirmed yesterday that it has entered into a definitive agreement to acquire Arizona-based LifeLock Inc. . ( Read More)
The Ensign Group's Unit Acquires River City Hospice Assets
The Ensign Group, Inc. (ENSG - Free Report) recently announced that its home health and hospice portfolio subsidiary, Cornerstone Healthcare, Inc., has completed the acquisition of certain assets of River City Hospice LLC. ( Read More)
Caterpillar's 47-Month Low Continues, October Sales Dip 12%
Caterpillar, Inc.’s (CAT - Free Report) global retail sales for the three-month period ending Oct 2016 plunged 12%. ( Read More)
Where Do Zacks' Investment Ideas Come From?
You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>