FED RAISES SHORT-TERM RATE A QUARTER POINT WITH DOVISH COMMENT -- DIVIDEND PAYING REITS AND UTILITIES LEAD REBOUND -- AT&T LEADS TELECOM HIGHER -- S&P CLEARS MOVING AVERAGE LINES -- VIX FALLS BACK BELOW 20
UTILITIES AND REITS JUMP... The Fed raised short-term rates a quarter point as expected, but softened the move with a dovish statement. Shorter-term yields in the two to five-year range are moving higher. Stocks are trading higher on the Fed move. The biggest gainers, however, are rate-sensitive stocks that pay dividends. Chart 1 shows the Utilities Sector SPDR (XLU) jumping more than 2%. Chart 2 shows the Dow Jones REIT Fund (RWR) jumping as well. The Fed's dovish tone may have also encouraged buying in dividend paying stocks. Telecoms are also strong for the same reason. Chart 3 shows AT&T (T) nearing a four-month closing high.
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Chart 1
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Chart 2
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Chart 3
S&P 500 RALLIES... Chart 4 shows the S&P 500 trading higher in an attempt to clear its moving average lines. Today's stock bounce is pretty broad with nine of ten stock sectors in the green. Energy is the only loser on a drop in crude oil. Banks are also having a relatively strong day. Foreign shares are reacting positively. Foreign developed and emerging market ETFs are seeing strong gains.
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Chart 4
VIX FALLS BELOW 20 ... Another positive sign is the drop in the Volatility (VIX) Index. Last week's move above 20 issued a negative warning for stocks. Today's 16% drop below that level sends a more positive message for stocks.
