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Fed's rate hike sparks rally in unlikely group

Stock Market Rise
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The Fed's decision Wednesday to increase interest rates for the first time since June 2006 sparked a rally in an unlikely group of stocks: dividend payers.

After the announcement, stocks treasured for their sizable payouts — like utilities, consumer staples and telecom — posted gains greater than 1 percent and ended the day as the S&P 500's biggest winners. In the past, Fed rate hikes took down most of these groups.

Some of the best performers in the Dow Jones industrial average were General Electric, Merck, Verizon and Coca-Cola, all names with dividend yields between 3 and 5 percent.

Shares of dividend payers, tracked through the iShares Select Dividend ETF, are down 4 percent for 2016 in anticipation of this very Fed moment. But now that the rate hike is done, how can it be that these stocks are leading the market higher?


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