Traders-Blog.com

The Federal Reserve raised interest rates and added skids to the market. Investors were further disappointed by the signals that further increases may be on the way. While the quarter-percentage point rate hike was expected, indication that the rate-hiking campaign is not over yet is what started the downhill trend.

Today, the Dow Jones industrial average closed down 95.57 or 0.8% to 11,154.54, the broader Standard & Poor’s 500 index closed down 8.38 or 0.6% to 1,293.23, and the tech-heavy Nasdaq composite index closed down 11.12 or 0.55 to 2,304.46.

Market breadth was negative. On the New York Stock Exchange, losers beat winners 21 to 11 on volume of 1.56 billion shares. On the Nasdaq, decliners topped advancers by 18 to 11 on volume of 2.04 billion shares.

The 15th increase in a row was as expected. It was in the statement that the bankers went into greater detail than in recent statements about the health of the economy in the first quarter after a rough fourth quarter, and about the impact of higher energy prices and other inflationary factors. What mattered was the part of the statement that hints at future policy. This still stated that some further firming “may be needed.” The market was concerned with the signal of continued hikes as well as the fact that the Feds underplayed the slowing of economic growth last quarter. The statement also did not discuss the housing market or the yield curve.

It has been reported that the Citigroup Inc. and the National Bank of Greece are battling to win control of a Turkish bank. Should Citigroup secure control of Finansbank in a deal expected to be valued at more than $5 billion, it would mark the company’s biggest transaction since Chuck Prince became chief executive. However, Citigroup shares ended the day down 4 cents at $47.60.

The Wall Street Journal reported that Lucent Technologies Inc. and France’s Alcatel SA are moving toward a plan to allay potential U.S. security concerns by placing some of Lucent’s most sensitive defense-related research under control of a separate board composed only of Americans. This however, led Lucent shares to close down 4 cents at $3.04. U.S. listed shares of Alcatel rose 1 cent to $15.44.

General Motors said it is laying off several hundred employees as part of its plan to bring its ailing North American operations back to profitability. The automaker is expected to announce more job cuts later in the year. Shares of General Motors Corp. closed down 18 cents or 0.8% at $22.75. This news came amid media reports that it’s planning to file its delayed annual report and that its board is expected to meet this week to discuss the potential sale of its GMAC financing arm.

The biggest losers in the market today were the tech and financial shares. Some of these included Hewlett Packard that closed down $1.04 or 3% to $32.07, AIG closed down $1.12 to $66.03, American Express closed down $0.79 to $52.57, and JP Morgan closed down $0.55 to $41.56.

U.S. light crude oil for May delivery rallied $1.91 or over 3% to settle at $66.07 a barrel on the New York Mercantile Exchange. The rise is attributed to fears of supply problems in Nigeria, Iraq, Iran; and the industrial disruptions in Europe adding to the increasing pressure.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter