U.S. Dollar Still Center Stage

by: Bill Cara

[Excerpted from Bill Cara's Daily Report]

Stronger global economic data, except in Japan, spurred international equity prices, but the key story continues to be the collapse of the US Dollar, which is serving to make it easier for global traders to buy stocks and commodities listed or denominated in $USD.

At the close in New York on Thursday, the S&P 500 (1,044.14 +10.77 +1.04%), DJIA (9,627.48 +80.26 +0.84%) and NASDAQ Composite (2,084.02 +23.63 +1.15%) all had a positive session, and the strength was apparent from the opening bell.

On Thursday, the US Dollar ($USD 76.81 -0.23 -0.30%) continued to leak after the UN pronouncement that they would work toward a global reserve currency, and trading in $GOLD (996.50 +3.96 +0.40%), despite the brief-lived pullback the previous day, saw more bids, and that has continued into Friday morning.

In other currencies, denominated in USD, the Euro (145.79 +0.13 +0.09%), Pound (166.56 +1.16 +0.70%), Yen (109.00 +0.40 +0.37%) and Canadian Dollar (92.83 +0.11 +0.12%), all lifted.

How low can the Dollar go? Another question is, how high can the oil price go? Crude Oil ($WTIC 72.17 +0.86 +1.21%) was very strong on the day, which defies Treasury Secretary Tim Geithner’s testimony that the economic crisis is far from over, and the reports of the known glut of oil and natural gas supplies.

As capital continued to flow out of the Dollar and into equities and oil, and now gold again, it somehow managed not to pull out of bonds. The US long treasury bond lifted in price ($USB 120.38 +0.62 +0.52%), as yields dropped. At the close, yields on the 30-year (4.175 -1.60 -3.69%), on the 10 year (3.342 -1.37 -3.94%), and on the 5 year paper (2.281 -0.94 -3.96%) were all lower. T-bills were still yielding almost zero (0.135 0.00 0.00%), which is only a good thing for the banks.

In US equity market sectors, the broad based rally was led by three winners, which were the Energy, Technology and Consumer Discretionary sectors (XLE +1.7% XLK +1.4% XLY +1.3%). Utilities (NYSEARCA:XLU), being flat, was the laggard. There were no losers, and volume was heavier.

Among the many industry group performance yesterday, Airlines ($XAL +6.7%) was by far the best, despite the higher oil price. Biotech ($BTK -0.15%) was the only loser.

For the Cara 100 company stocks on Thursday, the winners were an eclectic group led by the Brazilian food giant BRF, Disney, and Silver Wheaton (PDA +5.7% DIS +5.2% SLW +4.9%). The few losers were led by Electronic Arts and Myriad Genetics (ERTS -2.6% MYGN -2.6%).

Friday morning, in international equity markets, prices were higher everywhere except Japan where economic growth data was disappointing. In the Austral-Asian markets: the Nikkei 225 of Japan (10,444.3 -0.66%) dropped, but is still higher than last week’s close. China (2,989.8 +2.22%), buoyed by strong economic growth reports was very strong, while Hong Kong (21,161.4 +0.44%), Australia (4,596.3 +0.50%) and India (16,264.3 +0.29%) made smaller but solid gains.

As for the European stocks very early today, the mood was bullish. France (3,735.0 6:12AM ET +0.79%), Germany (5,623.2 6:11AM ET +0.51%) and the UK (5,021.6 6:11AM ET +0.68%) were, like most of Asia-Pacific, higher.

The gold and silver market was bid higher Friday morning with a stronger Euro, with the spot (cash) market prices as follows for gold (999.80 +0.15 +0.02% 06:28am ET), silver (16.80 -0.01 -0.06% 06:28am ET), platinum (1286 +1 +0.08% 06:06am ET) and palladium (291 +2 +0.69% 06:28am ET).

In the futures market Friday morning, prices are quiet for Crude Oil (72.06 -0.21 -0.29% 06:16am ET), Euro (1.4594 +0.0011 +0.08% 06:16am ET), and DJIA (9615 +10 +0.10% 06:17am ET).