The stock market is producing some excitement in spite it being a relatively quiet news day. The early morning rally has reversed into negative territory and many are blaming in on a rise in the U.S. dollar. The dollar's rise has certainly sparked some profit taking in the commodity sector. Meanwhile concerns over Bank of America is dragging financials lower. Most of the major sector indices are red but semiconductors, retail, and railroads are managing to buck the trend for now.
It's been a quiet day in Asia as well. The Hong Kong market was closed for a holiday and the Chinese Shanghai index closed almost unchanged on the session. The Japanese NIKKEI index rose 0.77% thanks to a drop in the yen, which boosted exporters. Earnings season is set to begin for the Japanese market this week.
Europe experienced a sharp, late-day sell-off with stocks losing their gains and closing in negative territory. News that Dutch financial giant ING was splitting the company into two segments was seen as a negative. ING will divide itself into a banking arm and an insurance arm. The stock was down about 18% on the news. Further depressing investor sentiment was a negative read on German consumer confidence. Germany is Europe's largest economy and the confidence index for November fell to 4.0 from October's 4.2. Economists were expecting a rise to 4.5. The German DAX lost 1.7% on the session. The French CAC-40 gave up 1.6%. The English FTSE fell 0.97%.
Here in the U.S. one of the major stories is the sudden strength in the dollar. Last week the dollar hit new 14-month lows. The currency was very oversold and a bounce was definitely overdue. No one should be surprised to see a bounce but it is noteworthy that the dollar is breaking out from a three-week bearish channel that was inside its larger downtrend. The dollar strength is fueling profit taking in the miners and the oil stocks with gold off more than $12 to $1,044 an ounce and oil down 2.2% to $76.88 a barrel.
In other news there was a story circulating that Congress would probably let the new homebuyer tax credit expire. Homebuilders and real estate agents have been lobbying hard for Congress to extend the tax credit that expires at the end of October. The DJUSHB home construction index is off 1.9% on the session.
Financials were some of the worst performers today with Bank of America (BAC) leading the decline. Investors are worried that the government will force BAC to raise up to $45 billion in capital by selling new stock to help pay back the TARP funds. Shares of BAC are currently down 3.3% but they're bouncing from their lows near psychological support at $15.00 this morning. The BKX is off 2.5% and the BIX banking index is down 2.0%.
Let's take a quick look at charts for the major averages:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
Chart of the U.S. dollar ETF (UUP):
A quick scan of the OptionInvestor.com play list reveals some unexpected strength in AVB with a 1.8% gain. CNQ and ESRX have broken support and hit our stop loss. The volatility index is rising, which is good news for our new call play.