Fed Rate Hike Sends Dollar Climbing

Janet Yellen, chair of the Federal Reserve, announced Wednesday that the Fed was raising interest rates for the first time since 2006, taking the benchmark rate up by 0.25%.

While largely anticipated, the move signaled increasing confidence in the strength of the US economy, which gave a boost to stock markets and the US dollar. Longer-term, the Fed expects rates to rise toward 3%, which would significantly raise borrowing costs for consumers and boost returns for savers.

Commodity markets initially dove on the announcement, since higher interest rates can decrease demand for raw materials, but prices stabilized by the end of the week, albeit near multiyear lows. Crude oil commanded only $35 per barrel, while gold garnered a mere $1065 per ounce.

Gas Parties like it's 1999

Prices for natural gas dropped to lows not seen in over 16 years due to warmer winter weather and an oversupplied market.

Weather across the Eastern US has been uncharacteristically warm in recent weeks and could lead to record warm Christmas temperatures. The weather pattern is a result of El Niño driving the jet stream and warmer air farther north than usual, leading people to leave the heat off when they normally would be cranking up the furnace.

On the supply side, there is still a record glut of natural gas in storage, a result of increasingly efficient shale gas drillers producing more gas than is being burned.

Some analysts warn that the market is over-saturated enough to be able to handle a sudden spike in consumption, even ifJack Frost makes a sudden appearance. As of midday Friday, January natural gas traded for $1.75 per million British thermal units (BTUs).

Meat Markets Burn up Repeal of COOL Rule

Unlike petroleum and natural gas, which tanked most of the week, livestock prices, especially cattle, exploded as congressional leaders moved to repeal a rule requiring that meats sold in the US be labeled according to their country of origin (COOL). The World Trade Organization recently ruled that COOL violated trade agreements with Canada and Mexico.

The meat industry perceived this repeal as a "bullish" Christmas gift which will allow for meat exports without the threat of tariffs from two of our largest trading partners, pushing cattle and hog prices sharply higher Friday.