Dollar Mixed, Gold Rises, Equities Move Up

The euro was down a hair against the U.S. dollar. The yen and British pound were up. It’s no surprise there should be conflicted signals among trading trends given the mixed messages coming out of the Fed.

The dollar strengthened last week as more people came to believe the Fed will hike rates in come December. However, weaker U.S. data in the past few days, including poor retail sales on Friday, prompted investors to take some profits.

So, it’s a kind of technical correction in the dollar, but it is really the confusing statements in speeches given by Federal Reserve Chairwoman Yellen, Vice-Chairman Stanley Fischer, and others. We have cited the countervailing statements since the minutes from September’s FOMC meeting came out this past Wednesday.

Most of the one half percentage rise in gold is therefore due to regular trading. The same holds for the nearly 1.00% rise in silver.

Strong earnings drove modest stock advances. Those earnings were centered around healthcare businesses. United Healthcare led the charge (up 7%) along with Johnson & Johnson. In other sectors, Goldman Sachs energized the banking and finance sector. In “new economy” news, Netflix was burning down the house with a 20% rise in price at one point today.

Even though IBM declined 2.65%, overall winners outnumbered losers on the Big Board 4 to 1. The Dow was up 0.40%, S&P 500 up 0.60% and the NASDAQ was up 0.85%.

Data was conflicting. The Labor Department Tuesday released its Consumer Price Index numbers, which rose 0.3%, meeting expectations. A big “however” here, though: the so-called core CPI rose just 0.1%, missing expectations.

The Fed's Beige Book, housing starts and existing home sales are some other key data releases scheduled for later this week. We might get a better read on where Fed thinking will go after that.

Oil was up slightly in sluggish trade as we await inventory and other data points in the sector later this week.

The CME’s FedWatch, which measures the likelihood of an interest rate increase, sits around 60, down a bit from yesterday. We hope if a rise comes it isn’t because everyone has shrugged and said, “Why not?”

Wishing you as always, good trading,