(MENAFN- ProactiveInvestors)A day after Federal Reserve Chair Janet Yellen delivered a dovish stance on rate hikes some pundits have begun to latch onto the fact the central bank has come around to financial markets' way of thinking. Yellen told the Economic Club of New York on Tuesday that policy makers had scaled back the number of interest rate increases they expect to carry out this year after investors did the same. But if US monetary policy is now dictated to by markets where does that leave the relationship between rates in the world's biggest economy and global oil prices If rates do go up in 2016 albeit more moderately than had been previously feared by markets what will be the effect on oil prices already nursing lows that have put some higher-cost US operators out of business While Wall Street tickers from the universal S&P500 through mid-caps to the small-cap Russell 2000 all posted gains on Tuesday in the wake of Yellen's dovish speech and the promise of easier credit to come - which might not have surprised those who have harboured the belief that the Fed Chair is ultimately a fan of monetary largesse - on Wednesday a lot of that sentiment unwound. Yellen's echo grew weaker and in fact oil prices resumed their downward path for much of the session with the US benchmark West Texas Intermediate last seen little changed on the day at $38.40 and just a third of what they were in 2011. What helped arrest further oil price declines this session were the latest weekly US Energy Information Administration inventories which counted a 2.3mln-barrel rise in crude-oil supplies for the week ended March 25 - modestly below the 2.6mln-barrel increase reported by the American Petroleum Institute. "US crude oil inventories hit a new record for the seventh consecutive time last week despite a surge in inputs to refineries a further drop in US oil production and lower imports" noted Thomas Pugh of Capital Economics. "A weaker dollar seems to be the main reason for the increase in oil prices today. In fact prices have slipped back a little after the release of today's status report despite crude oil stocks rising by slightly less than expected" he added. Capital Economics also commented that Yellen's remarks underline the "pivotal role of oil prices" as the world economy continues to struggle to get back on its own two feet. So if the Federal funds rate which has been at historically low levels between 2006 and 2015 is going higher at all in 2016 will that be good news for the oil price Prepare to be disappointed. One of the basic economic theories says that hiking interest rates raises consumers' and manufacturers' costs which in turn reduce the amount of time and money people commit to transport. Less people on the roads translates into less demand for oil which can cause oil prices to drop ceteris paribus. Although the US dollar temporarily slid in the aftermath of Yellen's comments on Tuesday rate hike talk is bound to give it a lift again. We saw just how much of a lift followed in mid-2013 and again mid-2015 when markets - erroneously - speculated on a much earlier series of rate hikes. So it supports the view that rate hikes result in weaker oil prices because rising rates also means a firmer dollar. When the dollar is strong this helps American oil companies buy more oil with every US dollar spent passing the savings on to consumers. Quite a statistic when you consider that the United States represents 25% global oil consumption. The knock-on effects of the oil price's direction will also be felt on Wall Street good and proper. Oil prices and the stock market do not usually trade as a highly correlated pair but since the beginning of 2016 the S&P 500 and crude oil prices have been moving in lock-step with one another. Rightly or wrongly markets perceive that depressed oil prices are a symptom of a weaker global economy. And what lower oil prices are doing is putting more money into the pockets of consumers. Spending will likely boost the economy as well as the stock market over time regardless of how long oil prices stay rangebound between $30 and $40. What economists hope for is that as economic growth picks up bourses will rise and no matter what OPEC nations resort to do about oil prices the historically uncorrelated relationship between oil and bourses will resume. Meanwhile what stocks have been hot or not on Wall Street today RISERS Apple (NASDAQ:AAPL) shares rose by 1.75% to $109.56 after Cowen upgraded Apple to "outperform" from "market perform" saying year-on-year comparable sales and forward earnings estimates have bottomed out. General Electric (NYSE:GE) shares gained 1.1% to $31.83 after the company agreed to sell its hotel real estate financing business to Western Alliance Bank for an undisclosed amount. FALLERS Valeant Pharmaceuticals (NYSE:VRX) shares lost 6.6% to $27.07 after the drug maker said it has not seen any additional issues affecting its prior financial statements following a review of those statements. It's also asked for an extension of time to file its annual report as well as its report for the current quarter. Boeing (NYSE:BA) shares dropped by 1.8% to $128.58 after the aircraft maker said it will cut more than 4500 jobs in is ongoing effort to cut the cost of producing jetliners.
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