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Market Update

Fed Hikes Rate After Nine Years

Author: Nichole Harper
Last Update: 2:22 PM ET December 16 2015

2:15 PM New York City, New York – Stocks on Wall Street gyrated but markets remained calm after the U.S. Federal Reserve raised interest rate for the first time in nine years. The increase of 0.25% is expected to be followed by additional but gradual increases. Crude oil dropped more than 3% and natural gas fell to 16-year low.

Stocks opened higher in New York trading but pared gains in the early afternoon ahead of the Fed decision this afternoon.

The widely watched Fed decision on the rate was welcomed by Wall Street with calm and investors shifted to the focus on the next Fed moves.

Federal Reserve raised its key lending rate by 0.25% from its near zero rate target and reaffirmed the gathering strength in the labor market and widening economic activities but cited ongoing geopolitical concerns.

To the date, seven years ago the Fed lowered its interest rate to near zero and cited weakening economic conditions and faltering financial markets.

The Fed lowered rates to near zero on Dec 16, 2008 and said rates would remain “exceptionally low” and the central bank was vague on how long the rates will be low but only said “for some time.”

Housing starts in November rose 10.5% to 1,173,000 annual rate from the revised October estimate and surged 16.5% from a year ago month rate of 1,007,000, the Department of Commerce said.

Housing permits in November jumped 11% from the revised October rate and grew 19.5% from a year ago month rate to 1,079,000.

November industrial production slid 0.6% from 0.4% decrease in October. Manufacturing production was unchanged, mining output fell 1.1% and utility output slid 4.3%, the Federal Reserve Bank reported today.

Total industrial production in November slid 1.2% from a year earlier month and total capacity utilization for industry fell to 77%.

On Wall Street, Tollbooth Strategy Index gained 20.89 or 0.2% to 10,851.84.

S&P 500 index jumped 22.21 or 1.1% to 2,044.42 and the Nasdaq Composite Index increased 55.09 or 1.1% to 5,007.32.

Crude oil in New York gained to $36.86 a barrel and gold rose $1.13 to $1,060.99 an ounce.

Earlier in New York trading, crude oil declined $1.50 or 4% to $35.86 a barrel before recovering and natural declined 4 cents to 16-year low to $1.79 per 1,000 cubic feet.

U.S. Movers

Honeywell International Inc (HON) jumped 3.9% or $3.86 to $102.33 after the diversified technology company forecasted revenues for the fiscal 2016 to increase between 4% and 6% or $39.9 billion to $40.9 billion and earnings per share in the range of $6.45 to $6.70.

The company reaffirmed its fiscal 2015 estimate for earnings per share of $6.10 per share on revenue of $38.5 billion.

Valeant Pharmaceuticals International, Inc (VRX) soared 6.5% to $117.44 after the specialty pharmaceutical products maker lowered revenues forecast for the fiscal 2015 between $10.4 billion and $10.5 billion from previous guidance of about $11 billion to $11.2 billion.

Stock jumped because investors were expecting weaker outlook.

Valeant also revised its adjusted earnings per share forecast for the year in the range of $10.23 to $10.33 compared to earlier estimated range of $11.67 to $11.87.

For the fiscal year 2016, the company forecasted revenues between $12.5 billion and $12.7 billion and adjusted earnings per share in the range of $13.25 to $13.75.

European Markets

European stock markets extended gains for the second day following the market advance in New York and ahead of key interest rate decision later today.

The October trade surplus of the Euro zone rose to €24.1 billion from €22.4 billion a year ago, according to the first estimates of Eurostat.

In the wider EU28 region, the trade surplus dropped to €3.2 billion in October from €6 billion in a year ago period.

Separately, Eurostat reported that the annual inflation rate in the euro zone rose to 0.2% in November from 0.1% in October.

In the EU28 region, annual inflation grew 0.1% in November, compared to being flat in the previous month.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc