Dollar's fall boosts stocks

Stock prices are rising today because Tuesday's panic over rising Chinese interest rates has faded, letting the dollar slip.

By Charley Blaine Oct 20, 2010 12:54PM
Updated: 6:50 p.m. ET.

To understand the stock market these day is to understand the dollar.

The dollar shot up Tuesday after reports that China is raising interest rates. U.S. stocks promptly headed south, with the Dow Jones ($INDU) falling 165 points to 10,979.
If rates are rising in China, the Chinese economy will cool off, and that's a problem on Wall Street because so many investors believe fervently that a weak Chinese economy sinks the global economy.

Stocks rebounded today, with the Dow finishing up 129 points, or 1.2%, to 11,108. The Standard & Poor's 500 Index ($INX) closed ahead 12 points, or 1.1%, to 1,178, and the Nasdaq Composite Index ($COMPX) rose 20 points, or 0.8%, to 2,457.

Yes, you can say it's because many companies reported strong third-quarter earnings. But the dollar was probably the bigger factor today, and it was falling.

And a falling dollar boosts profits earned abroad and makes U.S. exports cheaper. And it usually means commodities priced in dollars will rise as well: gold, copper, crude oil, steel, wheat, corn.

Gold is up to $1,344.20 an ounce. Crude oil fell below $80 on Tuesday and was over $82 a barrel today. Wheat and corn, two of the best-performing commodities this year, are higher. Corn was up 5% alone to $5.735 a bushel.

So the big winners among the 30 Dow stocks today were stocks with significant revenues coming from outside the United States or heavily dependent on the trend in commodity prices. Euro vs. dollar

We're talking Boeing (BA), Caterpillar (CAT), Intel (MCD), Chevron (CVX), DuPont (DD), IBM (IBM) and Exxon Mobil (XOM).

(Caterpillar and McDonald's report third-quarter results Thursday. )

For today at least, the thinking was that maybe the Chinese  economy -- not to mention fast-growing economies in India, Brazil and Russia -- isn't going to stop in its tracks.

And that's good for U.S. companies. If General Motors were public today, its shares would be jumping. GM now sells more cars in China than in the United States.

The dollar also moved lower because some are worried about the effects of more "quantitative easing" by the Federal Reserve next month.

That's the ghastly phrase used to describe the Fed's buying in Treasury securities to add more cash to the banking system and, one hopes, give the economy a jolt.

There's been a lot of gnashing of teeth about the dollar in recent weeks. But don't forget the dollar still has real power in panics. Investors want safe places to stick their money, they often go to gold -- and to the dollar.

In fact, the stock market slumped this past spring as the Greek credit crisis battered financial markets in Europe.

The euro's value sank to $1.19 on June 8 because many speculated that Europe would fall apart.

Europe hasn't fallen apart. It looks like the situation has stabilized, and the euro is back to $1.396, a 17.3% gain.

It's lousy for tourists but not so bad for GM.
12Comments
Oct 20, 2010 3:31PM
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Stupid is, as stupid does......

 

There are 5 times as many people in China as the US......Many Chinese work,to get ahead,save and have a better life...I don't believe they have welfare there; Anywhere similiar to what we have?

THEREFORE THEY WORK !!

 

They also don't have stupid ideas of " I will never buy a GM car again" or "I won't buy anything that is made by Union workers."

Only idiots and ignorant people think like that. And then wonder why,we are going down the tubes?

 

They buy what their own people make, knowing that most of the money will stay in their country.

That's why GM has invested heavely in China,also knowing where the next big economic power will be.  It's good common sense and good business.

Oct 20, 2010 2:06PM
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GM is selling more cars in China than in the US???!!!
Oct 20, 2010 1:48PM
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I love it.  The dollar falls and unemployment is high.  People with only government money just got poorer.  /Sounds like a win win for us people that work and pay taxes./  I hope the stocks keep rising ignoring reality.  

I would like to see a graph of companies increased revenue and profit after just a few quarters of high unemployment.  Then I would like to see the graph after 8-10 quarters of high unemployment.  When does the 10-20% unemployment finally drag the companies down?  Can anyone help? 
Oct 20, 2010 1:28PM
Oct 20, 2010 1:19PM
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Now is the time to keep an eye on the DOW. We are closing in on the years high. Should we break through 11,200 hold on we're going higher. If we can't make it through expect a correction. You heard it here first.
Oct 20, 2010 7:34PM
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"Dollar's fall boosts stocks".. Man there is something really wrong here. It almost makes me want to vote for the democraps. I guess I'm screwed either way..Sad

Oct 20, 2010 1:48PM
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i think wall street is off their med's, bi-polar or what??

yup two more will do just fineMartini glassOpen-mouthedMartini glass

Oct 20, 2010 2:27PM
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If GM is selling more cars in China, maybe it's time for them to clean up the toxic mess at the  factories they left behind.....$700 B + is the governments estimated cost of course that will multiply many times....

The true cost of the government bail out is a hell of alot more than they will ever pay back to the taxpayers!

The unions should do weekend cleanups to help pay for their share of the giveaway!!!!

Oct 20, 2010 3:12PM
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Barney Frank must be visiting the site....who else would Thumbs down SurinRI and myself....lol!!!
Oct 20, 2010 2:57PM
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SurfinRI,

As of right (1hour into the vote) now only 16.66% of the people that have voted are stupid...that's a comfort to know...lol

Oct 20, 2010 2:32PM
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There are 2 reasons the Chinese are buy Chevys....

1. They lent the money to pail GM out.

2. They have more people there with jobs then we do in the US.

Oct 20, 2010 1:57PM
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OK, let's pick up where we left off yesterday and, remember, this is not a scientific poll.  If the election were to be held today, and assuming that you lived in Barney Frank's Congressional district, please give a "Thumbs-up" if you would vote for his re-election or a "Thumbs-down" if you would vote against him. 
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