Day two of a declining U.S. Dollar in the face of rising U.S. interest rates.
After last December, when the Fed hiked, we had a similar response to what we see now.
Gold rose and the dollar declined.
Higher rates equate to higher prices and higher prices mean higher inflation. Inflation is not good for currency.
“If [the dollar] started really declining in a continual way that seems not to be just random or small fluctuations … that would indicate a real loss of confidence in the US economy, a real loss of confidence in the US government,” says Mr. Frieden, a professor of government at Harvard University and the author of “Currency Politics”.
He goes on to say, “The weaker the dollar is, the poorer Americans are on average. That’s not just rhetoric. That’s the reality.”
However, if the dollar weakens, US manufacturing and exports, become cheaper and therefore more competitive globally.
Furthermore, US firms with global operations also get a boost to their bottom line, as the business overseas becomes more valuable.
If US firms prosper while poorer Americans suffer, how will that impact the market?
I’m no economist, yet I do wonder about how much boosting business for US firms overseas does for the average middle-class to poorer consumer in America.
I also wonder that if the tax reform benefits to the corporations and the wealthiest Americans do not trickle down to the average American (historically, it never has), can the market hold up?
Today, AT&T celebrated by announcing that it would offer $1000 bonuses to over 200,000 employees with the tax savings.
And that they will increase US spending by $1 Billion.
Economists expect a potential immediate boost to the GDP as it will be cheaper for businesses to invest and consumers will have a bit more take-home pay.
Little evidence that tax cuts equal stronger Economic growth.
It adds $1.5 Trillion to the debt. That could come back to haunt the US.
Inflation, currently muted, if rises will force the Fed to raise the rates higher. That could starve the market gains.
Bottom line, despite tax reform, the now 2-day trend of a falling dollar and rising rates is worrisome, or at the very least, uncertain for the future of the economy and the market.
S&P 500 (SPY) 266.40 pivotal support
Russell 2000 (IWM) Inside day with support 152.
Dow (DIA) 245.60 the major support to hold
Nasdaq (QQQ) 156.40 support.
KRE (Regional Banks) 59.15 pivotal support
SMH (Semiconductors) Took out 100 but could not clear the 50 DMA so still warning phase
IYT (Transportation) Possible runaway gap if does not trade down to 190.31
IBB (Biotechnology) Through 107.50 see 110 at least. Under 105 some trouble.
XRT (Retail) 46.00 substantial resistance with 44.45 pivotal support
GLD (Gold Trust) Got right up to the 200 DMA resistance at 120.51
SLV (Silver) 15.20 should hold if good. Must clear/close over 15.40
GDX (Gold Miners) 22.63 the 50 DMA overhead resistance
XME (S&P Metals and Mining) 35.21 the 2017 high
USO (US Oil Fund) $60 a barrel a barrier to clear
XOP (Oil & Gas Exploration) 34.65 now support to hold
TAN (Solar Energy) 24.20 support
TLT (iShares 20+ Year Treasuries) Unconfirmed Distribution Phase with 123.85 weekly chart support
UUP (Dollar Bull) 24.24-24.45 range I am watching to break one way or another. Today’s low 24.24