Coffee With Greta: Surging Dollar Squeezes Stocks

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DJIA Futures: -131 (-0.4%)

SPX Futures: -19 (-0.5%)

NASDAQ Futures: -37 (-0.3%)

Good morning friends!

Futures are tumbling as the U.S. dollar continues to surge.

Let’s get right to it!

Dollar Surges Higher

The major indexes are all set to slide further at the open as the U.S. dollar continues to surge higher.

The British pound plunged to a record low against the dollar overnight following the U.K. government’s announcement of new tax cuts last week. 

It hit an all-time low of $1.0382 but has since recovered some of those losses. 

The euro also hit the lowest level against the dollar since 2002. 

Morgan Stanley’s chief U.S. equity strategist said in a note, “Such U.S. dollar strength has historically led to some kind of financial/economic crisis. If there was ever a time to be on the lookout for something to break, this would be it.”

Traders are watching the S&P 500 for any break below its low close for the year of 3,666.77.

The Dow Jones is expected to officially fall into a bear market today after closing just above that threshold Friday. 

Bostic Says the Fed Can Lower Inflation Without Killing the Economy

Atlanta Fed President Raphael Bostic expressed optimism about the bank’s battle against inflation in a “Face the Nation” interview Sunday. 

While he admitted the Fed’s efforts will likely cause job losses, he said, “there is a really good chance that if we have job losses it will be smaller than what we’ve seen in other situations.”

Bostic said he sees “positive momentum” in the U.S. economy.

“We’re still creating lots of jobs on a monthly basis. And so I actually think that there is some ability for the economy to absorb our actions,” he said. 

Bostic is among several Fed officials speaking at public events today. 

The Boston Fed President, Dallas Fed President, and Cleveland Fed President are all scheduled for speeches throughout the day as well. 

Fed Chair Jerome Powell speaks at events on both Tuesday and Wednesday.

More Fed officials will speak at events throughout the week.

Surging Dollar Beats Down Oil

Oil prices are falling as the strength of the dollar weighs on the market.

West Texas Intermediate crude futures are down 0.7% to $78 bbl while Brent crude futures are down 0.9% to $85 bbl. 

The recent drop in oil prices has been caused by the strength of the dollar, triggering fresh fears of a recession. 

Commodities are dollar-denominated assets, meaning they are more susceptible to large swings caused by the movement of the dollar. 

Housing Data Ahead This Week

Traders will get more data on the U.S. housing market this week, as buyer activity has slowed sharply due to surging mortgage rates. 

The latest home price index will be out tomorrow morning followed by August new home sales tomorrow as well. 

On Wednesday, the National Association of Realtors reports pending home sales for August. 

The housing market has ground to a halt in recent weeks as average 30-year mortgage rates topped 6% for the first time since 2008. 

GDP, Inflation Data On Deck

This week also includes some key economic data for traders. 

The Commerce Department releases its second revision of Q2 GDP on Thursday morning. 

Then the Bureau of Economic Analysis releases the August Personal Consumption Expenditures (PCE) Price Index on Friday. 

The Core PCE Price Index is the Fed’s preferred measure of inflation. 

Economists expect that index to show core prices rose 0.5% monthly and 4.7% annually in August, up from 0.1% and 4.6% in July, 

Inflation has been holding steady and even pushing higher despite the Fed’s three 0.75% rate hikes in a row.

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