Dollar's rally pulls stocks back

The Dow hits a 2-year high before falling back to a 39-point gain when a rising dollar stalls the rally. Gold and crude oil tumble. Bank of America slides on mortgage fears.

By Charley Blaine Oct 21, 2010 2:08PM
Charley BlaineUpdated: 11:20 p.m. ET

The operative question on the stock market today was: What happened to the rally?

The Dow Jones industrials ($INDU) were up as many as 106 points and hit a two-year high of 11,214 this morning. Then, the rally fell apart before late buying brought the market back.
The Dow closed up 39 points to 11,147. The Standard & Poor's 500 Index ($INX) was up 2 points to 1,180 after reaching as high as 1,189 in the morning. The Nasdaq Composite Index ($COMPX) was up 2 points to 2,460.

After the close, shares of American Express (AXP) and Amazon.com (AMZN) were sagging after third-quarter results beat estimates but disappointed investors. American Express earnings were up 71% from a year ago. Amazon's were up 13% to $231 million, or 51 cents a share, while revenue jumped 39% to $7.56 billion. Its fourth-quarter forecast was a disappointment.

Today was, in fact, a fairly wild day for stocks. The market's initial surge pushed the Dow above its April 26 closing high of 11,205. Then, the dollar pushed up, slamming metals and energy stocks. The Dow lost all of its gain, falling to a loss of as many as 42 points, before the late rally kicked in.

The dollar was one problem. The other big problem was the S&P 500's inability to hold above 1,185.

Some of the decline was a market reaction to slower Chinese growth. There were also worries that an expected Federal Reserve move in November to buy securities to boost the economy won't work.

The dollar was higher against just about all major currencies, including the British pound, the euro and the Japanese yen. The U.S. Dollar Index was up 0.3% to 77.634. Gold was down $18.60 to $1,325.60 an ounce. Crude oil settled down $1.98 to $80.53 a barrel.

Interest rates were higher, with the 10-year Treasury yield rising to 2.531% from 2.47% on Monday. 

The S&P 500's problem was this: It jumped above 1,185 right out of the gate and started to fall back. Technical analysts had expected 1,185 to act as a support level and a trigger to start new buying.

When no buying emerged, the support gave way. And so did the market.

An issue was weakness in Bank of America (BAC) because of worries about the mortgage foreclosure mess. Shares were off 3.3% to $11.36. The stock is down 5.2% this week and 13.3% this month.

Five big earnings reports come Friday, including Verizon Communications (VZ), Honeywell (HON), Schlumberger (SLB) and Ingersoll-Rand (IR).

Futures trading suggests that today's late momentum will continue on Friday.

Today's active stocks
  • Baxter International (BAX), up 3.4% to $51.07. The maker of intravenous drugs earned $1.01 a share in the third quarter, after one-time charges, beating the Street estimate of 97 cents.
  • EBay  (EBAY), up 6% to $27.19, tops among S&P 500 stocks. The online auction house forecast higher-than-expected fourth-quarter sales and earnings, due in part to growth of the company's PayPal payments service. A turnaround effort by CEO John Donahoe appears to be taking hold.
  • Netflix  (NFLX), up 12.8% to $172.69. The mail-order and online movie-rental service projected fourth-quarter earnings of as much as 74 cents a share. The Street's been looking for 70 cents. It expects to end 2010 with as many as 19.7 million subscribers, up from 18.5 million a year ago.
  • New York Times Co. (NYT), up 0.7% to $7.68. The 2100 Trust, headed by businessman Aaron Kushner, is organizing community investors to submit a letter of intent to buy the company’s Boston Globe.
Energy prices -- New York close
 

Thur.

Wed.

Month chg.

YTD chg.
Crude oil 

$80.56

$82.54

0.74%

1.51%
(per barrel)











Heating oil

$2.2145

$2.2548

-9.24%

4.67%
(per gallon)











Natural gas 

$3.3680

$3.5390

-13.02%

-39.55%
(per mil. BTU)











Unleaded gasoline

$2.0410

$2.0826

-0.19%

-0.58%
(per gallon)











Retail gasoline

$2.8310

$2.8310

5.28%

7.28%
(per gallon; AAA)












A big day for Dow stocks
The market's pullback came as four of the 30 Dow companies reported earnings, and there was a host of earnings from other important companies.

For the most part, the results were in line with estimates or better than expected. McDonald's (MCD), which reported $1.29 a share in earnings and a 6% gain in same-store sales, was up 1.3% to $78.44. That added nearly 8 points to the Dow by itself.

Caterpillar (CAT) reported $1.22 a share in earnings, up from 96 cents a year ago and ahead of the Street estimate of $1.09 a share. Revenue was up 53% to $11.1 billion.

But shares were down 1.2% to $78.89, a clear reaction to the dollar issue. That also may be because it is the second-best Dow performer this year, up more than 37%, and investors wanted to take some money off the table.

AT&T (T) earned 55 cents a share, in line with estimates, and shares were down 0.9% to $28.34. A concern among investors is how much business Verizon Wireless will take away when it's able to market a version of Apple's (AAPL) iPhone.

Travelers Companies (TRV), the insurance giant, was up 0.6% to $54.98. Earnings of $1.81 a share beat the Street estimate of $1.75.

Freeport-McMoRan, UPS earnings
There were other economically sensitive companies reporting today.

Freeport-McMoRan Copper & Gold (FCX) earned $2.49 a share, up 20% from a year ago, as revenue grew 24%. Shares were up 1.1% to $96.43 as the price of copper settled down 1.2 cents to $3.7815 a pound in New York.

Copper may be down today, but Freeport was able to realize a 27% price increase on the copper it sold during the quarter. That went with a 2.7% increase in copper production. Freeport sold less gold than a year ago. Nearly all of its gold comes from the giant Grasberg mine in the Indonesian side of New Guinea. There was less gold in the section of the mine being worked.

United Parcel Service (UPS) earned 93 cents a share, beating the consensus estimate by 5 cents. Revenue was up 9.3% to $12.2 billion, short of the consensus estimate of $12.4 billion.

But shares were off 6 cents to $69.59.
 

"We are assuming that the economy will be on a slow recovery path but we have set our strategies and investments to match that," Chief Financial Officer Kurt Kuehn told Reuters. "We feel pretty confident that, given the momentum, unless the economy weakens dramatically, that we'll be in great shape going forward."


Domestic revenue was up 6.1%; foreign revenue was up 10.7%.

Jobless claims fall; confidence rises
The jobs picture showed a big improvement.

The Labor Department said initial jobless claims fell by 23,000 to 452,000 during the week ended Oct. 16. Economists had expected the number to decline by 7,000.

But manufacturing activity in the mid-Atlantic region wasn’t as robust as economists anticipated. The Federal Reserve Bank of Philadelphia's manufacturing index came in at 1 for October, missing the 1.4 that Wall Street projected.

Leading indicators rose 0.3%, as expected, in September, compared with growth of 0.1% in August, The Conference Board said.

Short hits from the markets -- New York close
 
  Thur.

Wed.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.120%

0.130%

-20.00%

140.00%
5-year Treasury note 

1.126%

1.090%

-12.98%

-58.08%
10-year Treasury note

2.531%

2.470%

0.28%

-34.14%
30-year Treasury bond

3.940%

3.727%

6.57%

-15.10%
Currencies







 

 
U.S. Dollar Index

77.634

77.414

-1.65%

-0.75%
British pound

$1.5721

$1.5845

0.00%

-2.81%
(in U.S. $)











U.S. $ in pounds

£0.6361

£0.6311

0.00%

2.90%
Euro in dollars

$1.3931

$1.3963

1.99%

-2.80%
(in U.S. $)











U.S. $ in euros

€ 0.7178

€ 0.7162

-1.95%

2.88%
U.S. $ in yen 

81.50

81.13

-2.61%

-12.37%
U.S. $ in Chinese

6.67

6.65

-0.66%

-2.23%
yuan











Canada dollar

$0.975

$0.979

0.29%

2.50%
(in U.S. $)











U.S. dollar 

$1.027

$1.021

-0.29%

-2.43%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,325.60

$1,344.20

1.22%

20.93%
(per troy ounce)











Copper

$3.7815

$3.7935

3.56%

13.00%
(per pound)











Silver

$23.1390

$23.8640

6.04%

37.36%
(per troy ounce)











Wheat 

$6.6875

$6.8300

-0.78%

23.50%
(per bushel)











Corn

$5.6425

$5.7350

13.82%

36.13%
(per bushel)











Crude oil 

$80.56

$82.54

0.74%

1.51%
(per barrel)










 

18Comments
Oct 21, 2010 6:31PM
avatar

strong dollar - good for Walmart, bad for gold, bad for oil & natural resource stocks, bad for exporters, good for China, good if you have money, bad if you owe money

 

 

Oct 21, 2010 5:58PM
avatar

Midwestmoderate,

A weakening dollar destroys assets valued in dollars. Bondholders, your bank account, and those on fixed incomes are hurt the worst. All internationally traded commodities e.g. oil and grain go up in price. These go up because stronger currencies are bidding for those things along with the dollar.

 

Since the U.S. produces an ever smaller portion of its value added manufactured goods, chances that a weaker dollar will help our exports over all is not likely. Even if American labor rates were to fall to the point that they were on par with Chinese wages (through currency debasement), it would still leave American industry hamstrung with onerous government regulations, antiquated plant and equipment, and a very high tax rate. At that point in time the once envied American standard of living would be no better than that of the Chinese. Actually the American standard of living would probably worse since we will still have to carry the government yoke about our necks.

 

There may well come a time when mothers in China urge their children to eat their vegetables and remind them that there are starving children and old people in America.  

Oct 21, 2010 5:32PM
avatar
A weak dollar is good for a global economy, it's just a way for the elite empire to go to one world currency. We need to stop them and keep the dollar STRONG.
Oct 21, 2010 4:32PM
avatar
I always thought a strong dollar was a good thing. If America is supposed to be the #1 Economy in the World, shouldn't we have the most buying power as citizens. The dollar needs to be at the top not the bottom. Wall Street and Stocks are just legal gambling of peoples money. Screw them!
Oct 21, 2010 10:57PM
avatar

liberty,

I was off there for a bit. I think TBTs will do pretty well going forward. The market bounced off its high. Two more bounces off the high and TBT looks better than equities. If we close at new highs stay with equities.

 

Silver may correct. a possible opportunity to accumulate more.

Oct 21, 2010 8:09PM
avatar

Island with a palm treeDollars, like  commodites and equities, are also subject to speculations, so what's going on right now is that traders are scooping up cheap dollars ,and dumping  equities .

 

Feds doesn't have to do QE right now coz they already achieved the result if they actually did the QE, thanks to the speculators. In other words QE was already factored in, in the stock market. So for now, stock market will start to correct, and at a certain point the fed will again start talking about QE, that will once again make the dollar fall and equities to rise, and so on.Money

Oct 21, 2010 8:05PM
avatar
when will it surface that oil prices and stocks relate??  stocks go up so does the price at the pump...  to them it looks like consumers are spending when in turn its the other way around.  how can we spend if all our money is going to the pump???   then sure enough consumer spending is down then so is stocks then in turn so is the price at the pump...  vote big oil out for more of a neutral medium!!!!
Oct 21, 2010 7:42PM
avatar
Economic 101 dumb and dumber dummies. Refer to all posts above and below this one. Goodnight trolls! Eye-rolling
Oct 21, 2010 7:21PM
avatar

All,

 

POMO Permnament Open Market Operations. It's really involved, but it basically allows the FED to add money to the economy.

Oct 21, 2010 7:10PM
avatar

Buzzy,

 

Right on. You saved me the trouble of a reply. Thanks.

My PMs (gold, silver) are hurting right now. Maybe more TBT?

What you think?

Oct 21, 2010 4:58PM
Oct 21, 2010 4:27PM
avatar
not stock related but a lot of static over the jw firing
'JW' fired okay if i'm not mistaking 'geitner' isn't spelt with a 'j' or 'w' so who is this person?? closing time, are you kidding me, i just asked for twoMartini glassBaring teethMartini glass
Oct 21, 2010 3:39PM
avatar

"Stocks struggle as the dollar climbs, oil falls" Excuse me for not being a financial genius, but is the value of the US dollar climbing a bad thing? Is the price of a barrel of oil going down a bad thing? The  price of a barrel of oil should probably be somewhere in the $66-$69 dollar a barrel range anyway. ?? I don't know what the deal is with the price of gold. What is in the deal for the average american working citizen?

Oct 21, 2010 3:29PM
avatar
Think of the market as a hot air balloon. Investors turn up the gas, then the gov. and the fed hangs more weight in the gondola, and we sit back to see how well she flies. If the balloon gets too high too fast, she will rupture and fall hard and fast. Too bad we can't funnel some of the hot air on this board into the balloon.
Oct 21, 2010 2:31PM
avatar
'OH NO' is this the start of the retreat from 11,000; gold dropping on jobs report, something is fishy is wall street afraid of people working for a living.............okay, two more and then i'll ask againMartini glassNerdMartini glass  
Oct 21, 2010 2:30PM
avatar
manipulation of currencies will get no where other than where they should be, and that is zero. We will all go back to using gold and silver.
Oct 21, 2010 4:49PM
avatar

Regarding a "strong dollar"-  you only want a strong dollar if you want to buy things from abroad.

 

But if you want to discourage imports and encourage exports, you want the dollar "weak".

 

That is what the Chinese are doing- keeping their currency weak, and encouraging economic growth.

 

So don't let your ego for a "strong" dollar get in the way.  You want a "weak dollar" if you want economic growth.

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