Surging U.S. Dollar Drops Dow Jones Industrial Average

This Signal Could Mean Full Steam Ahead for Small Caps

Karee Venema
Nov 18, 2016 at 4:23 PM
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The Dow Jones Industrial Average (DJIA) closed lower today, as the U.S. Dollar Index (DXY) continued its march into 13-year-high territory, tacking on 2.3% for the week. Stocks also reacted as several Fed officials hinted that a December rate hike may be in the cards, echoing the hawkish tone taken by Fed Chair Janet Yellen on Thursday. It was a similar set-up with the S&P 500 Index (SPX) and Nasdaq Composite (COMP) -- the latter of which hit an all-time peak in intraday trading -- which settled the session in the red. Nevertheless, all three major U.S. benchmarks finished higher for the second week in a row.

Continue reading for more on today's market, including:

The Dow Jones Industrial Average (DJIA - 18,867.93) explored a roughly 62-point range, before closing down 35.9 points, or 0.2%. Nineteen of the Dow's 30 components lost ground, paced by a 1.3% drop for Merck & Co., Inc. (NYSE:MRK). Chevron Corporation (NYSE:CVX) led the advancers with its 1% gain. For the week, the Dow added 0.1%.

The S&P 500 Index (SPX - 2,181.90) gave back 5.2 points, or 0.2%, while the Nasdaq Composite (COMP - 5,321.51) lost 12.5 points, or 0.2%. Week-over-week, the SPX rose 0.8%, and the COMP jumped 1.6%.

The CBOE Volatility Index (VIX - 12.85) settled down 0.5 point, or 3.8%, to notch its first sub-13 close since Oct. 6. On a weekly basis, the market's "fear gauge" surrendered 9.3%.

Indexes closing summary November 18
NYSE and NASDAQ stats November 18

5 Items on Our Radar Today

  1. The Obama administration initiated a five-year plan that will restrict offshore drilling in the Arctic -- likely running in direct contrast to President-elect Donald Trump's promises to deregulate the oil industry. Interior Secretary Sally Jewell issued a statement saying, "Given the unique and challenging Arctic environment and industry’s declining interest in the area, forgoing lease sales in the Arctic is the right path forward."  (The Washington Post)
  2. According to The Wall Street Journal, Chipotle Mexican Grill, Inc (NYSE:CMG) is reportedly hashing out a plan with Bill Ackman that would allow the activist investor access to the burrito chain's board room. While no details have been released, Ackman and Chipotle were rumored to be having "confidential discussions" earlier this month.   (CNBC)
  3. Slow sales of Under Armour Inc's (NYSE:UA) latest Steph Curry shoes slammed the stock -- and had options bears betting on multi-year lows.
  4. This semiconductor stock surged 30% this week, and options traders responded in kind.
  5.  The options strategy that can help traders profit off of low volatility.

Quarterly Earnings November 18

Unusual Options Activity November 18
Data courtesy of Trade-Alert

Commodities:

December-dated crude futures fell 49 cents, or 1.1%, to settle at $44.93 per barrel, as the dollar strengthened and the U.S. rig count posted its biggest weekly rise since late June. Nevertheless, black gold tacked on 5.3% for the week -- snapping its three-week losing streak -- on hopes the Organization of the Petroleum Exporting Countries (OPEC) will agree to curb output at a meeting later this month.

Gold futures got smacked as the dollar climbed and expectations for a December rate hike grew. By session's end, gold for December delivery was down $8.20, or 0.7%, at $1,208.70 an ounce -- its lowest close since mid-February. What's more, the malleable metal logged its second weekly loss in a row, shedding 1.3% over the last five sessions.

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