Down goes the Dow

U.S. stocks on Thursday looked on a path to retreat from a run of records as the Federal Reserve communicated a faster path of rate increases in 2017.

The U.S. central bank lifted its key short-term rate to a range of 0.5% to 0.75%, from the previous 0.25% to 0.5%. It is also now planning three rate hikes in 2017, compared with the two hikes it had previously mapped out.

Futures for the major benchmarks were up modestly in up-and-down trade, with those for the Dow Jones Industrial Average gaining 16 points, or 0.1%, to 19,779.00. S&P 500 index futures slipping 1.25 points, or less than 0.1%, to 2,250.25, and futures for the Nasdaq-100 gave up 8.25 points, or 0.2%, 4,924.50.

The major indexes ended a volatile session lower on Wednesday, as investors considered the prospect of a faster pace of interest rate increases in 2017 a reason to pull back from the Federal Reserve, led by Chairwoman Janet Yellen. The Dow Jones Industrial Average dropped 118.5 points, or 0.6%, to 19,792.66. The S&P 500 index fell 18.44 points, or 0.8%, to 2,253.28. The Nasdaq Composite Index relinquished 27.16 points, or 0.5%, to 5,436.67.

While equities pulled back Wednesday, stocks have surged since the presidential election in November. Gains have been attributed to expectations that President-elect Donald Trump's policy proposals, such as tax cuts and deregulation, will spur economic growth. As a result, the Dow has been stepping closer to the key psychological level of 20,000, and major indexes have been hitting a series of record closes.

After the Fed decision, the "market disregarded Yellen's view that the shift in the so-called "dot plot' was small, and not all members actually agree that rates need to rise next year. However, "animal spirits," unleashed by President-elect Trump, "have won the day," said Kathleen Brooks, research director at City Index, in a note Thursday.

"The view seems to be that Trump will deliver on his fiscal stimulus promise, the economy will expand sharply, inflation will rise and the Fed will need to hike rates more than currently forecast, but not by enough to lead to a serious stock market sell-off," she wrote.

Lol Igy let me guess, uphill the whole way?

Here the HIGH tomorrow will not even rise to zero, 25 to 30 below for the low, not including wind chill. Time to start running in the football stadium.

Good luck keep the extremities warm.

Article I read has markets overpriced by many measures, but by only maybe 10-15% on average. Q: with Trump looking to insert himself into businesses how will utilities fare?

Ghost of Igloi wrote:

http://www.zerohedge.com/news/2016-12-14/janet-yellen-concerned-about-bubble-stock-prices-her-answer

Ok so Yellen says the rate of return on equities compared to the low interest rates is in the normal range. The author translates this into her saying valuations are normal. Is that really the same thing?

Read the comments after the article. It is alternately described as "fake news" or a joke. Keep in mind that Igy doesn't read beyond the headline.

OK they changed the forecast here now, won't be quite as cold.

Make no mistake, Yellen is a wolf in sheep's clothing.

DJIA heading close to 20k again. Paper gains all-important for pension fund books.

Maserati,

If I have a race in front of me I generally train harder. Unfortunately we have had cold temperatures (20s) and most days I train outside in the morning. Even the youngsters I train with look rather stiff at those temperatures, so I must really look rigid.

I don't have an opinion on the Trumpster in regards to the sector. Utilities are generally viewed as bond proxies and interest rate sensitive. The SPDR Utilities ETF (XLU) had a high of $53.02 on 7/6/2016 around the same time the 10 Treasury was at 1.36%. Today down around 10% from that high at $48. Even with that pullback the index has never been higher before this cycle. Previous cycle high was $44.66 in December 2007, the recent cycle low was $22.48 in March 2009. Generally every 1% move in interest rates will cause about a 10% move in a 10 Year Treasury (up or down). Stocks are longer duration assets, so the influence could be greater for XLU.

Igy

Whew!!

I hope everybody survived the big Igy predicted crash yesterday.

huh?

I actually think we will go higher based on institutional trading, not a fundamental growth pick-up in the economy. Traders are targeting Dow 20,000 and S&P 2,300.

Stock market is still grossly overvalued however.

Igy

Ghost of Igloi wrote:

huh?

I actually think we will go higher

Igy

WOW! It can't be.

Somebody needs to come clean and admit they stole his handle for this post.

It's actually pretty obvious who has been pushing this market. It is not retail investors with their E*TRADE accounts. One fundamental the institutional traders are pushing against is rising interest rates.

If Igy thinks the market is going higher, then it's time to sell. The DGTD contrarian indicator (aka Igy) is rarely wrong.

And Ghost of Igloi will forever be projecting a market collapse based on nothing. The market WILL return 10 to 12 percent long term. Do you agree with that, Igloi?

SJ,

I believe from here, the ten year return of the Dow or S&P 500 will be no better than the current 10 Year Treasury, or about 2.5%. So from here a domestic equity investor will collect dividends and little capital appreciation. At the next cycle low you will easily get your 10-12% equity return, just not now at current valuations. History supports my view.

Igy

Key words being "from here." Why would anyone buy high? Now if they bought when you first starting crying wolf, they'd be doing alright.

Buy low, sell high wrote:

Key words being "from here." Why would anyone buy high? Now if they bought when you first starting crying wolf, they'd be doing alright.

OK bright one. Well I first posted 3/2/2015 and the S&P 500 closed that day at 2,117 and we are currently 2,268; so a little than 7% high on the index in 21 1/2 months. By my math well off your 10-12% return.

By the way genius, do you realize that the index was a 2,085 on 11/4/2016 days before the election? That is not ancient history. Or, that S&P 500 GAAP EPS has dropped 17.7% since 9/30/2014?

Igy

Ghost of Igloi wrote:

agip,

Yes, historically because it is reflective of higher growth. GDP tracking under 2% with rising rates, we'll see. Definitely a negative for housing, autos and stock buy backs.

Hey I signed up for a 2 mile road race Saturday. We are expecting single digit temperatures. Thought I would man-up to the challenge.

Igy

good luck saturday - racing makes you feel alive, no? I'm a quiet guy but every race is a bloody adventure into the unknown.Machete in hand, into the jungle.

Cold here too - wind chill single digits anyway.

agip,

Yes, I have that internal aggression, however I am a little more meek at the moment (conditioning). The other day I was thinking I could go 7:30 miles, but not based on this morning's treadmill run. I ran .63 @ 7:30-7:22; rested 5:00; ran .38 @ 7:22-6:41. The run was not that comfortable, but I ran hard in the cold Tuesday morning. We had heavy snow yesterday, melting today with temperatures in the 40s. However, Friday will bring actual single digits if the forecast is correct. Looks like times may be somewhat irrelevant.

Igy

Ghost of Igloi wrote:

agip,

Yes, I have that internal aggression, however I am a little more meek at the moment (conditioning). The other day I was thinking I could go 7:30 miles, but not based on this morning's treadmill run. I ran .63 @ 7:30-7:22; rested 5:00; ran .38 @ 7:22-6:41. The run was not that comfortable, but I ran hard in the cold Tuesday morning. We had heavy snow yesterday, melting today with temperatures in the 40s. However, Friday will bring actual single digits if the forecast is correct. Looks like times may be somewhat irrelevant.

Igy

After 3 1/2 years from the ridiculous initial post that never materialized, I think maybe we should follow his lead and divert attention away from all of the data garbage he has put out and turn this into a running thread.

mellon wrote:

Ghost of Igloi wrote:

agip,

Yes, I have that internal aggression, however I am a little more meek at the moment (conditioning). The other day I was thinking I could go 7:30 miles, but not based on this morning's treadmill run. I ran .63 @ 7:30-7:22; rested 5:00; ran .38 @ 7:22-6:41. The run was not that comfortable, but I ran hard in the cold Tuesday morning. We had heavy snow yesterday, melting today with temperatures in the 40s. However, Friday will bring actual single digits if the forecast is correct. Looks like times may be somewhat irrelevant.

Igy

After 3 1/2 years from the ridiculous initial post that never materialized, I think maybe we should follow his lead and divert attention away from all of the data garbage he has put out and turn this into a running thread.

not sure you know this - Igy was a world class runner and has been in the sport at high levels also as a coach.

I was not world class. Maybe one of these years.

We've been encouraging each other for a while now.