5 Biggest Losers from the Fed Rate Hike

Separately, Markit’s final PMI manufacturing index came in at 52.8% in November – a 25-month low. Additionally, The Institute for Supply Management reported that ISM Services Index decreased to 55.9% in November from October’s reading of 59.1%. The drop was deeper than the consensus estimate of a decrease to 57.7%.

Dollar Effect

Following the Fed’s announcement, the dollar surged to a two week high versus a basket of several important currencies. A 0.25% increase in the benchmark rate was enough to trigger a 1% gain for the dollar versus a basket of currencies. While this is expected to have an adverse impact on emerging markets, even the domestic economy may not be spared.

This is because it will raise the price of exports. Domestic manufacturers are already finding it difficult to cope with a surging dollar. Oil has been affected the most even when it is suffering from a combination of weak demand and oversupply. Dollar-priced oil will now become costlier for those making purchases using other currencies. Market watchers believe that this will be detrimental to crude prices.

Weak Global Demand

On the demand side, global requirement has been falling for some time now. The ECB has failed to provide monetary stimulus that matches up to market expectations. Meanwhile, fears pertaining to China’s economy persist as the country undergoes the pains of transforming into one which is consumer driven and dependent on new economy companies.

Emerging economies may also find the going tough. Apart from the U.S., a few economies promise growth. This will continue to hamper the export-oriented sectors of the domestic economy as well as multinational corporations.

5 Biggest Losers

These are the five biggest losers of Thursday following the Fed’s rate hike decision. We have omitted those stocks that have moved southward on company-specific developments.

Mistras Group, Inc. MG declined 13.9% to $18.42

Voyager Therapeutics, Inc. VYGR declined 6.5% to $19.64

Energen Corp. EGN declined 6.3% to $46.70

SM Energy Company SM declined 6% to $21.62

Concho Resources, Inc. CXO declined 5.9% to $102.15

Bottom Line

Ultimately, the efficacy of the Fed’s plan to increase rates gradually will depend upon the strength of the real economy. Several indicators show that such concerns are not unjustified. In fact, the Fed too has acknowledged them with its decision to moderate the tightening cycle in response to such conditions.

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