This morning we noted how the dollar was strong and everything else was weak. That’s exactly the opposite of how things ended up.
But first, the scoreboard:
S&P 500: +4.42
And now, the top stories:
- Today started unquestionably in “risk off” mode with the yen rallying against the dollar, and the dollar rallying against everything else. Everything else was selling off, with big drops in the Nikkei and European markets.
- One key piece of news out of Asia: Steelmaker POSCO reported fairly weak earnings, suggesting demand weakness in China and elsewhere. That may have had a depressing effect. On the other hand, news of increased Chinese reserve requirements hardly had any negative effect at all.
- The big loser in Europe was France, where investors are concerned that strikes — yes, really, strikes in France — will paralyze the country or force Sarkozy to back down on pension reforms. That being said, things were fairly calm in Europe. Greek debt instruments continue to show confidence returning.
- And thus the scene was set for the US to wake up. Futures were down and the dollar was up. but by the time the opening bell came around, things were already abating. Gold, which had been down earlier, came back a bit. The dollar began to weaken. Everything seemed to be returning to form.
- And as the day wore on, things continued to go in that direction. The dollar basically weakened all day. Thanks to dovish (albeit unsurprising) FOMC minutes, traders had the green light to sell dollars on expectations of more QE.
- Econ news was light, as earnings season is set to come to a boil. Much of the talk, once again, concerned foreclosure-gate and the impact it will have on the housing market. Evidence is growing that folks are seriously beginning to freak out, with fears that the crisis will spread even to performing mortgages.
- A key group of winners: the offshore drillers. The White House is lifting the moratorium that has been in place since the BP Spill, which is good news for companies like Transocean and Diamond Offshore.
- In the end, we got a decent rally, especially on the NASDAQ, and when priced in gold (which slid since yesterday at 4:00 PM) the rally is even bigger.