Yellen Speaks, Yields Spike, Mortgage Rates Jump, Oil Plunges: But Why?

7th week of US Government debt ‘carnage’ continues unabated.
Stocks sold off, starting at 2:04 PM, as the Fed’s slightly more hawkish stance was sinking in. The S&P 500 ended the day down 0.8%. Not even a tempest in a teapot. Gold sold off, now down 17.6% since July. Oil plunged over 4%, but unrelated to the Fed: the market is figuring out that nothing beyond wild jabbering by oil potentates is happening to contain the oil glut. But natural gas jumped nearly 3%, based not on the Fed, but on the weather. And bonds? Another opportunity to use the word ‘rout’ or ‘carnage.’
The Fed increased its target rate for the second time in nearly a decade, after having done so a year ago for the first time. It raised it from next to nothing by nearly nothing to a little above nothing: a range of 0.5% to 0.75%. But according to its dot plot, whose reliability has become a joke, it will raise rates three times next year, up from the prior dot plot which indicated only two hikes.
At the press conference, Fed Chair Yellen explained the rate hike that everyone had taken for granted: ‘My colleagues and I are recognizing the considerable progress the economy has made toward our dual objectives of maximum employment and price stability….’

This post was published at Wolf Street on Dec 14, 2016.