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SPY Rose as Federal Reserve’s Rate Hike Met Market Expectations

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Dec. 4 2020, Updated 10:50 a.m. ET

Sector performances

The following graph presents the percentage changes in the component sectors of the SPDR S&P 500 ETF (SPY) on December 16 (as of 2:05 PM EST) as the Federal Open Market Committee (or FOMC) announced its rate hike decision on Wednesday.

As we see from the graph, except for the energy sector and the material sector, all the component sectors of the SPY marched north with the release of the FOMC statement about its rate hike decision. FOMC raised the federal funds rate by 25 basis points. After assessing the labor market, inflation, consumer confidence, consumer spendings, jobless claims, and other requisite economic conditions, the FOMC had forecast the interest rate hike to be in the range of 0% to 0.25%.

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Utility and consumer stocks gained

The US equity markets were somewhat bullish as the rate hike decision met expectations. Investors and traders preferred defensive stocks like stocks from the utility sector and the consumer staples sector. These stocks are referred to as “defensive” because they are less volatile to the broad market movement and are dividend-paying stocks.

Utility stocks like NRG Energy (NRG), Ameren (AEE), Dominion Resources (D), AGL Resources (GAS), and Duke Energy (DUK) advanced 1.7%, 2.2%, 1.2%, 0.1%, and 1.4%, respectively, on December 16, as of 2:30 PM EST. Stocks of the financial companies rose slightly less as these stocks were already overbought. Energy stocks went down due to the plunge in oil prices.

For more analysis on US equities, visit our US Equity ETFs page.

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