I was out of the office this morning, so today will be an afternoon update.
Stocks were down worldwide for a second day as bond yields continued to rise amid skittishness over the tapering of quantitative easing in the U.S., and the Bank of Japan’s refusal to extend their QE program in response to domestic bond volatility.
The dollar was down again versus the euro and yen, hitting its lowest point since February, and crossing below the 200 DMA for the first time since February 20. The yen had fallen back after yesterday’s biggest gain in 3 years, but recovered strength as the dollar swooned. The euro is at its 61.8% Fibonacci retracement from February’s high, which may lend support to the common currency.
Oil was stronger today, which, along with the dollar’s weakness, supported gold prices. The Chinese market is closed for holiday, so their usual physical demand was absent in Asian trading overnight.
On Wall St., stocks opened higher, but were solidly in the red by noon, posting a third day of losses. The market is waiting for the Fed to take away the punchbowl, so large institutional traders are selling into the rallies to lock in profits in this volatile environment. Stocks continue to be in an upside-down world where good news on the economy causes stocks to drop, as it means the Fed may stop pumping $85 billion a month into the bond and mortgage markets.
The markets are looking to tomorrow, when the first-time jobless claims and retail sales reports are due, and next week, when the Federal Reserve Open Market Committee meets on Tuesday and Wednesday to set monetary policy.