How Did Base Metals React to the Fed's Interest Rate Hike?

(Continued from Prior Part)

On December 16, 2015, at 2:00 PM EST, the Fed’s interest rate decision was released, revealing a rise of 25 basis points in interest rates. The copper prices declined then quickly recovered, and the same price action was seen in major base metal miners by 3:00 pm EST.

Freeport-McMoRan (FCX), one of the major producers of copper, declined after the release on Wednesday. Freeport was seen trading as high as $6.85, or 4.9% above the previous day’s close, in the morning session of the trade. Half an hour after the Fed’s interest rate decision—at 2:30 pm EST—Freeport traded at $6.53. This was the same as the previous day’s close.

By 3:00 pm EST, Freeport surged to $6.75, or 3.4% above the previous day’s close. Freeport is one of the top decliners among base metal miners in 2015. Since the beginning of 2015, Freeport lost more than 70%. Alcoa (AA), a primary aluminum producer, also declined right after the release of the interest rate hike decision. Alcoa traded as high as $9.25 in the morning session but fell to $9.1 at 2:30 pm EST. On the other hand, it recovered to $9.25, or 1.4% above the previous day’s close, by 3:00 pm EST.

A price action similar to Freeport-McMoRan (FCX) and Alcoa was seen in BHP Billiton (BHP) and Rio Tinto (RIO). BHP fell after the interest rate hike and reached $24.01 at 2:30 pm EST. Later, BHP recovered and reached $24.52, or 3% above the previous day’s close, by 3:00 pm EST.

Just like other major base metal miners, Rio Tinto declined after the decision then recovered. Rio was seen trading at $28.58 at 2:30 pm EST, then surged to $29, or 2.9% above the previous day’s close, by 3:00 PM EST. The SPDR S&P Metals & Mining ETF (XME) traded at ~$14.9, a rise of 1% from previous day’s close, at 3:00 pm EST.

Browse this series on Market Realist:

• Part 1 - Copper Fell Sharply after the Fed’s Decision, then Recovered