Stocks Hit Two-Day Skid Erasing Initial Optimism for Yellen Hike

23 Dec 2015 | Author: | No comments yet »

Stocks Hit Two-Day Skid Erasing Initial Optimism for Yellen Hike.

After rallying into midweek, the Standard & Poor’s 500 Index reversed course on Thursday and Friday, tumbling 3.3 percent to post the biggest two-day decline ever to follow the start of a Federal Reserve tightening cycle. Back were concerns that tumbling commodity prices amounted to evidence that global growth is faltering. “It was an accomplishment that the Fed raised rates, and it shows confidence in the economy, but at the moment pessimism seems to be winning out,” said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion. “The hike was somewhat old news by the time they did it, and the market was looking for the next catalyst. Among other things, Friday’s selloff came on a day that often sees higher-than-normal price swings, the quarterly expiration of futures and options on indexes and individual stocks.

That’s 72 percent above the three-month average and the most since the height of the summer selloff on Aug. 24. “There are a number of things going on in the background of the Fed, a lot of things that are confounding the normal reactions that you would have expected,” said Peter Jankovskis, co-chief investment officer of Lisle, Illinois-based OakBrook Investments LLC. ‘‘It’s a fairly short-term reaction. Eventually within a month or more this will be taken as positive news that the economy is strong enough for a rate hike.” The S&P 500 fell 0.3 percent in the week, with its biggest two-day slide since Sept. 1 erasing a gain in the final minutes of trading Friday. Both gauges ended the period at two-month lows, as exuberance over the Fed’s signal that the American economy is ready to walk on its own faded into concern that higher borrowing costs could hamper growth as China’s slowdown shows no signs of abating. While the market got its long-awaited roadmap from central bankers, the Fed-induced rally evaporated as falling oil prices recaptured investor attention, said Walter “Bucky” Hellwig, who helps manage $17 billion as a senior vice president at BB&T Wealth Management in Birmingham, Alabama. While utilities stocks rallied 2.7 percent for the biggest gain since July, raw-materials companies slumped for a second straight week, sliding 3.1 percent to a 10-week low.

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