S&P 500’s Best Day since October 2013

Thanks to the Fed’s announcement, today was the stock market’s best day in 14 months. The S&P 500 gained 2.04% for its biggest surge since October 10, 2013. This was the second-best day in nearly two years. The gains were led by the energy sector and small-caps.

In short, things that had been doing poorly did very well today. Between yesterday’s low and today’s high, the Russia ETF ($RSX) gained 27%. Oil rose to $55.81, although it nearly hit $59 earlier in the session.

I think the market had a hard time deciding whether today’s news from the Fed was good or bad. Check out today’s action in the five-year Treasury:

Ultimately, the market fell into the “good” camp. Regarding how long it will be before they raise rates, the FOMC removed the words “considerable time” and replaced that with saying “it can be patient.” Despite the new language, Janet Yellen stressed that there’s been no change in policy. The difference is that we’re now further away from the end of QE, so the length of time is no longer considerable although the date remains the same.

I suppose this can be considered a “dovish” statement, but what strikes me is the distance between the Fed and the market on interest rates. The Fed sees rates at 2.5% at the end of 2016 while the market sees rates at 1.5%. Frankly, I’m on the market’s side. For what it’s worth, Yellen also thinks the slide in oil is transitory.

One note on today’s Cuba news: The CUBA Beverage Company ($CUBV) closed 78% higher today on volume that was 513 times normal. It’s an energy drink company that has nothing to do with the island nation. Yet there are people who still believe in efficient markets.

Posted by Eddy Elfenbein on December 17th, 2014 at 9:26 pm

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