Friday, October 21, 2016

Analysts Weigh In On Stocks and the Dollar

From Barron's Stocks to Watch:

Enjoy the Ride: Dow Drops 100 Points as Soaring Dollar Sinks Stocks

Stocks are heading lower this morning as the strong dollar threatens to upend the market.
The S&P 500 has fallen 0.4% to 2,133.85 at 10:28 a.m. today, while the Dow Jones Industrial Average has dropped 108.55 points, or 0.6%, to 18,053.80. The Nasdaq Composite has dipped 0.1% to 5,239.32. The U.S. Dollar index has gained 0.4% today.
Evercore ISI’s Dennis DeBusschereexplains why the dollar is rising:
US dollar gains, which accelerated after the ECB yesterday, has been a headwind for U.S. stocks…The U.S. dollar index is up +3.2% since the start of the month, which has also coincided with a -1% decline in the S&P. Fed officials have expressed discomfort with USD strength over the past year, but with inflation expectations increasing and credit spreads near their 2016 low, the pace of USD gains is not having much of an impact on December rate hike odds, which are still above 65%. The decline in the Euro helps support the Stoxx at the expense of the S&P near term. Promises from Fed officials to raise rates at a very gradual pace and expectations that economic growth will remain stable are helping keep credit spreads tight. Credit spreads typically move in the opposite direction of economic activity, so if one thinks the global economy is going to improve then spreads could tighten further.
Rhino Trading’s Michael Block explains why the rising dollar is such a problem for U.S. stocks:...MORE