Markets & Economy

Interest rates have lifted off: This week in the market

  • The prime rate moved mechanically to 3.50 percent, rising in lockstep as it will after each future increase in Fed funds.
  • The stock market rose in relief that the Fed was not more aggressive in its words or projections, but has fainted since.
  • Gold fell to a six-year low. Oil broke below $35 per barrel. Natural gas broke below two bucks.

We have liftoff.  The long and short of it follow -- short first. The immediate reaction to the Fed’s first hike in 1- years, from a band “0 percent to .25 percent” to .50 percent: The prime rate moved mechanically to 3.50 percent, rising in lockstep as it will after each future increase in Fed funds. Prime is the index for most home equity lines of credit, whose payments will rise in the next envelope, as will those for adjustable rate mortgages. The stock market rose in relief that the Fed was not more aggressive in its words or projections, but has fainted since. Try not to pay attention to stocks, though. Once each year, maybe. Stocks are vulnerable to the Fed in part because the grand game of corporate borrowing to buy-back stocks is about to end. Gold fell to a six-year low. Oil broke below $35 per barrel. Natural gas broke below two bucks. Charts appended are staggering. Three mechanisms are in play in those markets: Demand is down, and appears mor...