Dollar powers to fresh highs; stocks and oil fall

The party lasted just one day.  The dollar has already gone back up with a new report today showing inflation near zero, once again portending a very healthy recovery and bad news for those fearing an interest rate hike announcement from the Fed next week.  The strengthening dollar is not only bad news for U.S. companies doing business in international markets (thus threatening their profits), but also caused oil to plummet again, today falling 4.4% with crude now back to $45/barrel.  Investors are pretty convinced at this point that the Fed next Wednesday will announce a June interest hike, whereas the hopes have been that it would come much later in the year.  This anticipation has caused so many jitters that the inflation report caused a 300 point crash in the Dow by mid-day, though it did recover half of that loss by the end of the session to close 145 points down.  Obviously, if this announcement does not happen, if indeed the Fed sticks to its oft stated position that there will be no interest rate hike until the underemployment picture has substantially improved, then the market will be soaring again mid next week.  Though I don't think the rates will be increased next week, I personally hope they are since we have been burdened with this very jittery market for way too long.   The recovery is coming along nicely.  It is time for the Fed to allow interest rates to go up again.  It is the only way to prove that the recovery WILL continue and that the market WILL adapt without the dire consequences so many fear.  My personal opinion is that this is the only way to end these wild day-by-day swings and, once these swings end, the recovery will pick up even more steam.  But that's just my opinion.  With 6.8 billion shares traded today, it's obvious most investors do not share my opinion.  So I will leave everyone on this Friday the 13th with one important question:  If we lost 300 points during the day and then recovered fully half of that by 4 p.m., is this really investor fears of the Fed or is it actually just old fashioned profit taking?

Dollar powers to fresh highs; stocks and oil fall

BY RODRIGO CAMPOS

DJ:    17,749.31  -145.91     NAS:   4,871.76  -21.53      S&P:   2,053.40  -12.55

NEW YORK Fri Mar 13, 2015 5:00pm EDT

(Reuters) - The dollar surged on Friday as weak inflation data failed to stem expectations the Federal Reserve will move to tighten monetary policy, and the greenback's rise pressured stocks and commodities.

The dollar index .DXY rose 0.8 percent, setting up its first close above 100 since April 2003. The Fed's policy-setting committee meets next week.

Stocks fell on Wall Street on concerns of the impact of higher rates and a stronger dollar on corporate profits. The S&P 500 was down for a third straight week, though it is just 3 percent below its record high set early this month.

"The stronger dollar, the continued hammering of the euro equals continued lower equity prices ahead of the Fed comments next week," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. "We'll know more of the Fed's thinking on Wednesday but right now most people are expecting a rate hike to come in June and the equity markets not to be very receptive of that."

The Dow Jones industrial average .DJI fell 145.91 points, or 0.82 percent, to 17,749.31, theS&P 500 .SPX lost 12.55 points, or 0.61 percent, to 2,053.4, and the Nasdaq Composite.IXIC dropped 21.53 points, or 0.44 percent, to 4,871.76.

For the week, the Dow was down 0.6 percent, the S&P 500 was off 0.9 percent and theNasdaq was down 1.1 percent .

The MSCI All-Country World equity index .MIWD00000PUS fell 0.6 percent.

The FTSEurofirst 300 pan-European index .FTEU3 closed up 0.3 percent. Stocks in Europe continued to be supported by the massive bond-buying program at the European Central Bank.

The divergence in monetary policy between the ECB and the Fed pushed the euro EUR=further down against the greenback, with the bloc's currency hitting a 12-year low of $1.0460. It was last down 1.3 percent at $1.0496.

The dollar rallied even after disappointing U.S. inflation and consumer sentiment data, which normally would weaken the currency.

"This isn't so much about the data, rather the Fed and what to expect from next week's meetings," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.

The dollar index .DXY added 0.7 percent to 100.16.

U.S. crude CLc1 fell 4.4 percent to $45 per barrel, while Brent crude LCOc1 fell 4.6 percent to $54.43. The global oil glut is getting bigger and U.S. production shows no sign of slowing, the International Energy Agency said.

Largely because of the oil selloff, the Thomson Reuters/CRB Commodities Index .TRJCRB settled at a six-year low.

The U.S. benchmark 10-year Treasury note yield US10YT=RR rose to 2.1192 percent from late Thursday's 2.096 percent, with the price down 7/32.

"The market's consolidating," said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco. "It's hard to be a buyer at this point."

Spot gold XAU= edged up 0.2 percent to $1,156 an ounce, following nine consecutive sessions of declines. Copper CMCU3 gained 0.25 percent to close the week up 2 percent.

Note:  Volume data was not reported today but, according to BATSGlobal, 6.8 billion shares traded which is in line with recent averages.