It's now up to Fed Chairwoman Janet Yellen to destroy the stock market at her press conference, as the Federal Open Market Committee statement did not do the trick.
Why? Well, the reason stocks rallied a bit off news of the first rate hike after the Great Recession is that Yellen & Co. delivered, perhaps, one of the most superbly worded communiques in Fed history. Not only did the Fed throw some support behind the economy's improvement (important to do in light of market's rally in response to the November jobs report), but in using the word "gradual" twice in the statement as it pertains to the pace of future rate hikes, it also suggests 50-basis-point increases at each meeting in 2016 are unlikely.
I know the mere thought of that seems absurd given the U.S. economy's sluggish growth backdrop and industrial recession that is fueled by the dollar's strength and the plunge in commodities, which in turn are pressuring results for companies such as Deere (DE) and 3M (MMM). But, the crash in junk bonds and in emerging-market stocks in recent weeks, in my view, have investors preparing for a more hawkish Fed next year than what we have been accustomed to during the recovery. So far, that thesis has not gained support in the aftermath of the Fed's move.
Here is what you have to like from the FOMC statement:
"A range of recent labor market indicators, including ongoing job gains and declining unemployment, shows further improvement and confirms that underutilization of labor resources has diminished appreciably since early this year." Remember, it's good to see people getting back to work -- that's how sustainable economic growth is driven people, not by quantitative easing and silly low interest rates.
"The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen." I like seeing the Fed suggesting the economy has arrived at a point in which gradual rate hikes can be digested by companies and markets.
"The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective. Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation." Important for the Fed to reiterate to businesses interest rate policy is still friendly.
"The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate." Most important, the Fed reiterated that its future rate decisions will be data-dependent.
When asked via email by TheStreet if the first rate hike would trigger a recession in 2016, legendary investor and CEO of Omega Advisors Leon Cooperman flatly said, "No." Perhaps that is something the markets agree with in the early going.
We now await the content of Yellen's news conference.