Janet Yellen gave the market a ride by confirming what many traders expected anyway and that was that rates could rise 6 months after quantitative easing ends. Of course while the market at least in the Fed Funds was already assuming that the boldness and clarity of the statement will make anyone feel that Fed Chairperson Janet Yellen is not your ordinary dove.
While the stock market dipped hard the bulls should have known that if they were right with this massive stock market rally at some point rates would have to rise. And indeed that may not be a bad thing. It could inspire economic activity for those that want to lock in rates at the lows and get some folks off of the fence.
For oil (NYMEX:CLJ14) the market was having a hard time digesting it. Oil has got help from a weakening U.S. Dollar Index (NYBOT:DXH14). A firmer dollar would put downward pressure on a market that is already well supplied. Yet seasonal factors and the possibility of geopolitical risk is giving the market support. And if the economy is strong enough for the Fed to consider raising interest rates perhaps we will see a surge in energy demand that will match the recent move up in stocks.
Yet of course that would have to be balanced with the fall out to emerging markets. Emerging markets are finding it is harder to survive without the hot money provided by QE and it is going to be hard to adjust. With the rising possibility that China is going to have a hard landing the risks to oil are weighted to the downside. Yet oil bulls love the spring as refinery maintence and the gasoline summer blend switchover always seems to give us a boost. Spring has sprung and it helps oil.
BP at the auction! BP is back after a deal with the EPA and will bid for Gulf oil leases like it was life or death. Maybe for BP it will be. The Financial Times Reports, "BP fresh off its deal to be able to do business with the U.S. government. Financial Time reports that has reached an agreement with the US Environmental Protection Agency that will allow the energy company to resume bidding for federal government contracts, ending a ban resulting from the 2010 Deepwater Horizon disaster. The agreement—which includes commitments from the company on ethics compliance, corporate governance, and process safety—will allow BP to resume signing deals for drilling rights in the Gulf of Mexico and for fuel supplies to the military and other branches of government."