Wednesday, December 16, 2009

MarketWrap for 12/16/09-Stocks mixed on Fed comments....

U.S. stocks were mixed today, the dollar strengthened against the yen and yields on 10-year Treasury notes rose to a four-month high on concern the Federal Reserve is preparing investors for higher interest rates next year.   The FOMC stated that economic activity has continued to pick up and that deterioration in the labor market is abating.  The FOMC also expressed that conditions in the financial markets are improving, so some of the Fed's special liquidity facilities will soon end as planned.  The FOMC indicated that the target range for the federal funds rate will remain at 0.00% to 0.25% and that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The overall language in the statement is consistent with previous statements, so it helped calm concerns that the Fed may look to raise interest rates sooner than later.

Though the dollar was able to improve its position, support for commodities remained strong. That gave the CRB Commodity Index a 1.6% gain, its best by percent in three weeks, and helped the materials sector outperform.  Materials stocks advanced 1.0%, led by diversified metals and miners (+1.7%).

Energy stocks also looked strong.  They advanced 0.5% as oil prices closed 2.8% higher at $72.68 per barrel.  Early weakness in the dollar and a larger-than-expected weekly inventory draw of 3.69 million barrels underpinned oil's strength.

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