Investors Reassess Markets After First Rate Adjustment in Three Years 

Last week marked the first adjustment in interest rates in the last three years as investors spent the latter part of the week trying to figure out the implications of monetary tightening, rising Treasury yields, persistent inflation and advancing crude oil prices. By week’s end, tech stocks showed resilience while large caps ticked lower. Ten-year Treasury yields closed at about 5.00%, reaching levels not seen since 2007. Higher yields weighed heavily on Utilities, Financials, Real Estate, Materials and Industrials. Information Technology and Communication Services outperformed. Crude oil prices ticked lower but continued to hover around $100.00 per barrel. 

Fed Delivers First Rate Hike in Three Years, Signals More to Come 

By a unanimous vote, the Federal Reserve raised the target range for the federal funds rate by 25 basis points to 3.75%-4.00%. This is the first rate hike in three years. According to the statement released by the Fed, economic activity is expanding at a solid pace, domestic spending has been resilient, productivity is strong and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little. However, inflation remains elevated. The statement further indicated that the rate hike will support a timelier return to the Fed’s 2.0% inflation goal. Projections showed the majority of Fed policymakers anticipate at least one more 25-basis-point hike by the end of this year. 

Eye on the Week Ahead 

There’s not much in the way of important economic data this week as investors gear up for next week’s gross domestic product report and the Personal Consumption Expenditures Price Index for August.