Just as expected, the Federal Reserve bumped up the Fed Funds Rate by a quarter of a point on Wednesday. What was surprising was how hawkish the updated explanation from the Fed’s chairperson Janet Yellen wasn’t. By the time the closing bell rang, the S&P 500 had mustered a 0.84% gain to close at 2,385.26.
Not every name was prodded higher, however. Direxion Shares Exchange Traded Fund Trust (NYSEARCA:DUST), Macy’s Inc (NYSE:M) and Twitter Inc (NYSE:TWTR) were left out of the Fed-inspired rally, with two of them peeling back specifically because of the Fed’s decision.
Twitter Inc (TWTR)
Angel investor and now-former Twitter supporter Jason Calacanis wasn’t shy about sharing his concerns regarding the microblogging site today. He told CNBC:
“I don’t know what the board was thinking putting a half-time CEO in, but if your company cannot grow in a time of political upheaval, you have have a reality TV president using it and is going completely rogue on the platform, then you will never grow.”
He added that TWTR is the “worst stock you could own” in the technology sector.
The market took his worries to heart, sending TWTR shares lower to the tune of 1.9% on Wednesday.
Macy’s Inc (M)
Don’t look for a specific, direct reason shares of struggling retailer Macy’s lost 2% of their value today — you won’t find it. There were a couple of indirect reasons, however, M couldn’t get up and off the mat.
One of them was last month’s lackluster retail sales report. Although they were up the expected 0.1%, that was the weakest progress we’ve seen in the past six months, suggesting consumers are starting to draw up their purse strings again.
The other headwind M shares faced on Wednesday was the potential impact of the 1/4 point increase in the Fed Funds Rate. This move — particularly if it’s the first of the anticipated three rate hikes this year — will make it less compelling for credit card users to spend on apparel shopping.
Direxion Shares Exchange Traded Fund (DUST)
Last but not least, one of the worst performing stocks on Wednesday wasn’t a stock at all. Rather, it was an exchange-traded fund — the Direxion Daily Gold Miners Bear 3X ETF gave up 23% of its value today. Once again, blame the Fed.
Generally the U.S. dollar moves in tandem with U.S. interest rates, and what’s good for the dollar is also generally bad for gold and even worse for the highly leveraged gold miners. It’s worst of all, however, for a triple-leverage bear gold mining ETF like DUST.
The irony? Gold prices didn’t fall because the dollar didn’t rise with rates. The greenback lost 1.21% of its value on Wednesday, sending gold 1.5% higher to end the session at $1220.70 per ounce.
The strong move for gold and the even stronger bullish move for gold miners took a huge toll in instruments like DUST that ultimately bet against gold and its related stocks.
Again traders were expecting Yellen to be a little more hawkish, and had bolstered the dollar over the past few days. Now the air is being let out of those tires.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.