Zacks' Voice of the People Highlights user inthemoneystocks: "When the Dollar Rallies, Traders Listen" from the People & Picks community.
For more Voice of the People, visit http://at.zacks.com/?id=5851
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When the Dollar Rallies, Traders Listen
This morning the major stock market indexes are all under pressure. There are a couple of obvious reasons for this action in the stock market today. The first reason for this decline today is the weakness in the Shanghai Index (Chinese stock market) last night. The Shanghai Index dropped by nearly 3.0 percent last night. As we all know by now, the Chinese markets seem to lead the global markets. The world is betting on the growth in China to keep the markets strong by consumption.
The second major factor for today's stock market decline is the stronger U.S. Dollar Index. When the U.S. Dollar Index trades higher the major market indexes seem to deflate. Remember that most commodities are traded in U.S. Dollars. Since early June the U.S. Dollar Index has declined by nearly 10.0 percent. Ironically, the stock market indexes have rallied higher by about 10.0 percent since early July.
When the U.S. Dollar declines the major market indexes will inflate; it is that simple at this time. Major commodity stocks such as Southern Copper Corp (SCCO), AK Steel Holdings Corp (AKS) and Cliffs Natural Resources Inc (CLF) will all come under pressure when the U.S. Dollar trades higher.
Today the FOMC will meet and announce any changes in policy. The Federal Reserve Bank is expected to leave the fed funds rate (overnight lending rate to the major banks) at 0.0 – 0.25 percent. This is where this key rate has been since December 2008. Essentially, the large major banks can borrow money for free from the Federal Reserve Bank and buy U.S. Treasuries, have their credit card business, and do proprietary trading to make money. They no longer need to lend money to their prospective borrowers. Therefore, it is critical that the Federal Reserve Bank keep these rates at near zero percent in order for these major banks to keep making money.
When the U.S. Dollar rallies higher the major market indexes simply deflate. The opposite is true when the dollar declines the major stock market indexes will inflate and trade higher. Therefore, the action in the dollar is the driving force behind every market move.
About the Zacks Community
In 2008, Zacks Investment Research launched PeopleAndPicks.com, a stock-picking website where members of the Zacks community can test their strategies and share ideas with other members. Each user is scored on the accuracy of his or her picks, and top users are rewarded with free products from Zacks. Registration is free. To learn more visit http://www.PeopleAndPicks.com
AK STEEL HLDG (AKS): Free Stock Analysis Report
CLIFFS NATURAL (CLF): Free Stock Analysis Report
SOUTHERN COPPER (SCCO): Free Stock Analysis Report
Zacks Investment Research
Market News and Data brought to you by Benzinga APIsFor more Voice of the People, visit http://at.zacks.com/?id=5851
Featured Post
When the Dollar Rallies, Traders Listen
This morning the major stock market indexes are all under pressure. There are a couple of obvious reasons for this action in the stock market today. The first reason for this decline today is the weakness in the Shanghai Index (Chinese stock market) last night. The Shanghai Index dropped by nearly 3.0 percent last night. As we all know by now, the Chinese markets seem to lead the global markets. The world is betting on the growth in China to keep the markets strong by consumption.
The second major factor for today's stock market decline is the stronger U.S. Dollar Index. When the U.S. Dollar Index trades higher the major market indexes seem to deflate. Remember that most commodities are traded in U.S. Dollars. Since early June the U.S. Dollar Index has declined by nearly 10.0 percent. Ironically, the stock market indexes have rallied higher by about 10.0 percent since early July.
When the U.S. Dollar declines the major market indexes will inflate; it is that simple at this time. Major commodity stocks such as Southern Copper Corp (SCCO), AK Steel Holdings Corp (AKS) and Cliffs Natural Resources Inc (CLF) will all come under pressure when the U.S. Dollar trades higher.
Today the FOMC will meet and announce any changes in policy. The Federal Reserve Bank is expected to leave the fed funds rate (overnight lending rate to the major banks) at 0.0 – 0.25 percent. This is where this key rate has been since December 2008. Essentially, the large major banks can borrow money for free from the Federal Reserve Bank and buy U.S. Treasuries, have their credit card business, and do proprietary trading to make money. They no longer need to lend money to their prospective borrowers. Therefore, it is critical that the Federal Reserve Bank keep these rates at near zero percent in order for these major banks to keep making money.
When the U.S. Dollar rallies higher the major market indexes simply deflate. The opposite is true when the dollar declines the major stock market indexes will inflate and trade higher. Therefore, the action in the dollar is the driving force behind every market move.
About the Zacks Community
In 2008, Zacks Investment Research launched PeopleAndPicks.com, a stock-picking website where members of the Zacks community can test their strategies and share ideas with other members. Each user is scored on the accuracy of his or her picks, and top users are rewarded with free products from Zacks. Registration is free. To learn more visit http://www.PeopleAndPicks.com
AK STEEL HLDG (AKS): Free Stock Analysis Report
CLIFFS NATURAL (CLF): Free Stock Analysis Report
SOUTHERN COPPER (SCCO): Free Stock Analysis Report
Zacks Investment Research
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