Screaming US Dollar Frightens Equity Markets
Today's financial recap and tomorrow's financial outlook.
The volatility spike continued today as the US dollar extended its rally.
The dollar rose 1.4% against the euro on a combination of anticipation of the Fed raising interest rates, and the European Central Bank's quantitative easing program, which launched yesterday.
European bond yields fell sharply, with the 10-year German Bund falling to just 0.234%. That correspondingly drove demand for US Treasuries, which on a relative basis, offer higher yields.
The S&P 500 fell 1.7% to 2044.20, slicing through its widely-watched 50 day moving average, which sat at 2061.
Today was the second 1%+ move in the last three trading days, indicating that the market has broken out of the low-volatility trend that dominated February and early March. As such, the VIX was up 10.3% to 16.61 today.
Stocks were led down by index giant Apple (AAPL).
Apple fell 2.0% today, extending yesterday's 'sell-the-news' reaction following the Watch launch event. Citi Research raised its target price on Apple to $145 from $135 this morning, though that obviously had no impact on the trading action.
Biotechnology stocks were back in focus today, showing significant outperformance as the SPDR S&P Biotech ETF (XBI) rose 0.4%.
Outside of biotech, however, there were few bright spots in US equity markets. Financials were down sharply on the increased market uncertainty, and export-dependent sectors like technology, consumer staples, and industrials suffered as the strong dollar threatens their profitability.
High-beta groups like Internet security and social media also came under tremendous pressure.
And in another sign of how tough the action was, chipmaker Qualcomm (QCOM) announced a $15 billion share repurchase program after the close Monday, and still failed to rally today.
Wednesday's Financial Outlook
Tomorrow will be another light day in terms of economic data and earnings reports, with no market-moving events on the horizon in the US.
However, negative headlines are coming out of Greece again, and the relentless strength in the US dollar is keeping traders on edge.
ECB President Mario Draghi will speak in Frankfurt tomorrow. Late in the afternoon, the Reserve Bank of New Zealand will announce its interest rate decision and hold a press conference, and in the evening, Australia will deliver its February employment report.
Daily Recap Newsletter