Dollar's rally pulls stocks back

Updated: 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.

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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)