Now that the Fed’s meeting is over, the timing of the rate hike has made investors anxious. The delay in the rate hike is a sign of the health of the domestic economy.
On September 18, the UK stock market experienced a fall in consumer staples. The financial sector also fell steeply.
Bristol-Myers Squibb (BMY) gained 3.46% on September 18. The stock traded at $64.34, crossing its 20-day, 50-day, and 200-day moving averages.
On September 18, the top gainer of the day was oil and gas company Chesapeake Energy (CHK). CHK rose by 4.07%, and the analyst stock price target is $9.76.
The financials sector (XLF) is valued attractively at a forward PE of 12.1x, almost 21% cheaper than the S&P 500 which is valued at 15.3x.
A rate hike could benefit the financials sector. Traditional banks could lend at slightly higher rates and park excess reserves at higher rates, beefing up their NIMs.
Companies in the tech sector have a cash on hand–to–debt ratio of 106%. The massive cash reserves act as a sizable buffer against rising borrowing costs.
Technology and financials led the pack in terms of buyback activity in 4Q14. This was evident in the sector-wise breakup of dollar-value buybacks in 4Q14.
Although the recent market sell-off and global volatility eliminated a rate hike this week, US economic data still support Fed liftoff.
The UK private sector pay rose 4.4%, while the public sector rose 0.6%. This is anticipated to boost the consumer demand in the country.
The stock rally continued from Tuesday, September 15, to Wednesday, September 16, in the UK stock market. The iShares MSCI United Kingdom ETF (EWU) rose 2.31% on September 16.
September 16 saw a rally of stocks across all sectors. Investors were confident that day that the Fed wouldn’t go for a rate hike during its afternoon meeting.
The much-awaited meeting over an interest rate hike has caused volatility in US stock markets for more than a month. But US investors seemed unfazed on September 16, the day of the meeting.
The SEP release in September 2015 had better news for economic growth for 2015 compared to June. The FOMC participants revised their projections upwards.
The central tendency of projections for core-PCE inflation for 2015 didn’t change between June and September. It fell slightly for 2016 and 2017.
The September 2015 dot plot indicated a slower-than-expected rate hike path for the federal funds rate going forward. This was reiterated by Janet Yellen.
When the Fed refers to “inflation,” it’s talking about the rate of change in PCE (personal consumption expenditure) inflation. This is the price index for PCE.
Job additions in the past 20 months have been strong. This indicates the strength in the US labor market. The US labor market added 173,000 jobs in August.
The US economy rose by 3.70% in 2Q15, according to the second estimate by the BEA (U.S. Bureau of Economic Analysis) on August 27.
The hike didn’t come about in the September 2015 meeting. This led to a fall in equities. They showed their displeasure over the delay in the rate hike.