This morning, the major stocks indexes are declining sharply after the weak non-farm payroll report was released by the U.S. Labor Department. The government reported just 18,000 jobs created, meanwhile, the unemployment rate increased to 9.2 percent. Normally, when the U.S. Dollar Index declines the stock market indexes will inflate and trade higher. So far this morning, the U.S. Dollar Index and the major stock indexes are both declining lower.
At this point, we have to assume that if the U.S. Dollar Index declines further throughout the trading session the major stock indexes will inflate and trade off the lows. Sometimes this inverse relationship between the U.S. Dollar Index and the major stock markets will disconnect for short periods, however, over the long haul this relationship has been intact for over 10 years nows.
The leading commodity stocks are usually the first equities that will inflate higher on the back of the falling U.S. Dollar Index. At the moment, the U.S. Dollar Index futures (DX U1) are trading lower by 0.02 cents to $75.23 per contract. Traders should realize that the U.S. Dollar Index was trading around the $75.73 level at 8:30 am EST when the job report was released. Therefore, the U.S. Dollar Index has plummeted along with the stock market. Should the U.S. Dollar Index start to trade off of the lows the major stock indexes could decline further.
Some leading stocks that will usually trade higher from a weak U.S. Dollar Index include ConocoPhillips(NYSE:COP), Exxon Mobil Corp.(NYSE:XOM) and Freeport McMoRan Copper & Gold Inc.(NYSE:FCX). These leading stocks will also sell off or decline further should the U.S. Dollar trade higher on the session.