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- As The Fed Ramps Up Rate Hikes, These Stocks May Move The Most
As The Fed Ramps Up Rate Hikes, These Stocks May Move The Most
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Loading...The Federal Reserve has been full of surprises lately, and there's good reason to expect another on Wednesday.
Back in December, 11 of 17 members of the Fed's policy committee were expecting at least three rate hikes in 2017, and 5 members were expecting at least four hikes.
Earlier this month, Fed Chair Janet Yellen, undoubtedly among those December doves penciling in two rate hikes, made clear that she now sees three hikes as appropriate. As Yellen moved to the center, the big question is whether the center itself moved. It wouldn't take much — perhaps only half of the six members who expected exactly three hikes in December to up their expectation by one notch.
With the 10-year Treasury yield just below its highest levels since the spring of 2014, a shift in Fed expectations to four rate hikes this year might be the catalyst for a breakout to the upside. That might be good news for financials like Bank of America (BAC) and Dow Jones industrial average components Goldman Sachs (GS) and JPMorgan Chase (JPM), which can reap higher net interest margins from rising interest rates and a steeper yield curve. But it might be a negative for shares of homebuilders like Toll Brothers (TOL), Lennar (LEN) and D.R. Horton (DHI).
In the past few weeks, BofA, JPMorgan and Goldman have consolidated as Treasury yields have soared. Meanwhile, the homebuilder group has been on fire, with Toll and Lennar among a raft of stocks breaking out of bases amid strong earnings and expectations for what is expected to be a strong spring selling season. But a further jump in market rates may begin to dampen the outlook.
A more proactive Fed also could continue to drag down gold miners like Newmont Mining (NEM) and Barrick Gold (ABX). The price of gold has slumped close to 5% over the past two weeks as the market has priced in a faster pace of rate hikes and the dollar has strengthened.
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