Will the Dollar Resume Its Trend?

  • January 30, 2003
  • Vincent Mao

Stock index futures fell for the first day in three as weak economic growth
and the ever-increasing likelihood of war once again put pressure on index
futures. Just as they were about to emerge from oversold conditions, the three
major stock index futures ended the day sharply lower after yesterday’s reversal
day.

A positive start was quickly aborted as both the GDP and initial jobless
claims report came in worse than expected. Gross domestic product for the fourth
quarter grew at a 0.7% pace versus expectations of a 0.9% rate. Weakness in
consumer spending, the labor market, and a wider trade deficit offset strength
in the housing sector. Initial claims also came in weaker than expected at
397,00 versus expectations of 385,000. However, jobless claims could be
stabilizing as they have stayed below the 400,000 mark for four straight weeks
now.

At the close, the March Dow futures
(
DJH3 |
Quote |
Chart |
News |
PowerRating) lost 179 to 7895, the March S&P
(
SPH3 |
Quote |
Chart |
News |
PowerRating) dropped 20.70 to 840, and the March Nasdaq
100 contract
(
NDH3 |
Quote |
Chart |
News |
PowerRating) fell 26.50 to 987.00. All three contracts
are hovering near their 61.8% retracements from the October lows. 

Despite weakness in stocks, the dollar displayed its biggest jump against the
Euro in four weeks. A 1.5% rise in business spending last quarter helped to
boost the greenback. The March dollar index
(
DXH3 |
Quote |
Chart |
News |
PowerRating)  jumped 0.22 to 99.75, and the dollar strengthened to 107.860
against the Euro, basis the March contract. 

Treasury futures bounced back after declining for the past three sessions.
Treasury futures benefited from today’s weakness in stocks as well as the worse
than expected economic news. At the close, the 30-year
contract 
(
USH3 |
Quote |
Chart |
News |
PowerRating) gained 21/32 to 111 23/32 and the
10-year contract
(
TYH3 |
Quote |
Chart |
News |
PowerRating) gained 11/32 to
114 1/32.

Crude oil was once again higher amid the potential of war with Iraq. Crude
prices also benefited as yesterday’s report by the Department of Energy revealed
that crude supplies are slipping. March crude
(
CLH3 |
Quote |
Chart |
News |
PowerRating) gained 0.22 to 33.85.

After pulling back for the past couple of sessions, gold is once again
higher. February gold
(
GCG3 |
Quote |
Chart |
News |
PowerRating) gained 2
to 368.60 after reaching a high of 370 earlier in the session.