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It's All About the Currencies

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Today's economic calendar stands empty, and the earnings calendar is light, too. Pre-market, U.S. market participants looked to the foreign markets for guidance, as was evidenced by the overnight behavior of the U.S. futures. Those futures mirrored the ups and downs of foreign markets.

The big news today appears to be the dollar's precipitous decline against the euro, with the euro nearing a four-year high against the dollar and the yen. A roundtable discussion on CBNC World this morning asked whether the declining dollar could stimulate growth in the U.S. and elsewhere. The participants concluded that since exports made up such a small percentage of the U.S. economy, the declining dollar could not be expected to stimulate its economy, and the decline certainly hurt the German and Japanese economies, which depend on exports to a much larger degree. Although I'm not learned about currency matters, the conclusion seemed a foregone one, but I mention it to pinpoint the worldwide attention focused on the declining dollar. One European investment advisor commented that although his clients were pleased with the recent performance of the U.S. stock markets, they were pulling their U.S. longs as they watched the declining dollar and the U.S. markets' reaction. They were not initiating many shorts, however.

Both Japanese Finance Minister Masajuro Shiokawa and ECB President Wim Duisenberg reportedly commented that their respective currencies were too strong against the dollar. Another CNBC World discussion concluded that at some point investors would see that the Eurozone economies were not performing well and would stop investing in those economies, leveling off the euro's increase against the dollar. A third discussion concluded that although Japan had been somewhat successful in limiting the yen's increase against the dollar in the past, the dollar's decline was now gaining so much momentum that it was unlikely that the Japanese government could be as successful in renewed attempts.

How were those foreign markets behaving overnight and how did the U.S. futures mirror that behavior? After a quick dive to the low of the day of 8009.37, the Nikkei began climbing, closing up 120.61 points or 1.5%, to 8152.16. ES futures climbed, too, reaching a short-term high of 924.25 near 3 am ET, even though the Nikkei's climb seemed built more on hopes of a better future than realities depicted by economic numbers. Japan's economic calendar included the release of the March index of leading indicators. The number fell below 50 for the first time since October, signaling a contraction in the Japanese economy. News surfaced that a threatened strike by transportation workers may shut the Busan port. Truck drivers have been striking for a week, slowing steel deliveries to companies such as Hyundai Motor Company. Still, as the Nikkei opened, the yen was falling slightly against the dollar, counterbalancing the negative economic news, as did the information that government ministers would meet next week to begin discussing emergency economic plans, including those proposed by the three ruling coalition parties. It was hope engendered by that meeting that started the climb in the Nikkei.

Soon after the European markets opened, they, too, dove to their respective day's lows, and the US futures slipped, too, dropping to 920. The March German industrial production number was released, showing a decline almost twice as large as had been expected. The U.K. industrial production number was also worse than expected. Then European markets, too, began climbing off their lows, and our futures climbed with them. As of 8:30 ET, European markets struggled to hold onto key levels. The FTSE 100 was up 22.70 points or .58%, to 3951.60; the CAC 40 was up .79 points or 0.03%, to 2939.96; and the DAX was up 18.32 points or 0.63%, to 2904.40. U.S. S&P futures were up 4.10 to 924.60, DJI futures were up 27 to 8505, and Nasdaq futures were up 11.50 to 119.50.

Although our earnings calendar is light, graphic chipmaker Nvidia (NVDA) might be one stock to watch this morning. Pre-market trading indicates that the stock might open more than a point above its 16.06 closing value yesterday, with current prices quoted somewhere near 18.00 at 8:30 ET. Although yesterday NVDA posted a smaller profit and revenue was down, the report beat expectations. The stock seems to be trading up under the at-least-it-wasn't-worse thesis. If NVDA does open near the pre-market levels, that would bump the stock above the exponential 200-dma, currently at 16.19. Other chipmakers were benefiting from NVDA's results as well as reassuring statements about PC sales apparently made by Intel's CEO at a road show. Coca-Cola (KO) might be another stock to watch today, as it obtained its second upgrade of the week. Bear Stearns upgraded it to "outperform" from "peer perform," and set a 12-month price target of $49. After gapping up Wednesday on another upgrade, KO traded an inside day yesterday.

The HL Camp & Company trading office is closed today, and did not provide information on fair value for the S&P or program buying and selling values.

Linda Piazza

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