When interest rates change, whether they move up or down, stock investors should pay attention because the market will react.

Interest rates affect almost everything in the economy from investments to borrowing to employment. It is one economic metric stock investors should keep current on to protect your portfolio.

The Federal Reserve Open Market Committee (the Fed) sets interest rates (actually targets, but it amounts to the same thing) for banks and other lenders.

Interest rates are used to control the amount of money in the economy. When interest rates are high, it dampens the market for credit, so businesses and individuals are less likely to borrow.

Low interest rates encourage borrowing by consumers and businesses. This puts more money to work in the economy for purchases.

Consumers buy cars and homes and businesses expand – at least, that's how it is supposed to work.

For stock investors, low interest rates mean companies can borrow money for expansion, acquisitions and so on. Consumers are more likely to make major purchases such as homes and cars.

Higher interest rates discourage borrowing and companies may put expansion plans on hold. Consumers are less likely to make major purchases.

In short, low interest rates tend to stimulate the economy (and increase the value of stocks), while high interest rates are associated with a slowing of the economy.

Stock investors should keep a close watch on news and opinion that interest rates are going to change.

Often when rates change, the biggest move in stock prices is at that moment.

If investors anticipate a change, some of the stock market reaction may be reflected in stock prices before the actual change. For stock investors, it is important to anticipate interest rate change and the affect the change has on stock prices.