US stocks dipped as investors continued to be cautious when Donald Trump, the President-Elect of the United States alleged that the country’s economy is harmed by a stronger currency.
US dollar down
The US dollar was sent into a tailspin due to Trump’s comments. In his interview with Wall Street Journal, the President-Elect said that the US dollar was too much strong as China kept Yuan, the Chinese currency, weaker. According to the President-Elect, American companies cannot compete in trade with China as the US dollar is too strong. This will hurt the United States economically. The dollar went up by five percent during 2016’s fourth quarter. It has since been drifting from the beginning of 2017. The bond yields reversal also shows that investors are much worried. There has been a rise in 10 year Treasury prices over past few weeks. The yield has dropped to about 2.3 percent-the lowest level within a span of recent seven weeks.
The DJIA or Dow Jones Industrial Average dipped 0.3 percent or 59.96 points to touch 19,826.77. Similarly, the Standard & Poor 500 declined by 0.3 percent or 6.75 points to 2,267.89. Most losses were made by the healthcare and financial sectors. American markets were closed on January 15 being a Martin Luther King Jr. Day. The date was a holiday. The Nasdaq slid 0.6 percent or 35.39 points to stop at 5,538.73. Hardest falls were sustained by biotechnology stocks. A two percent decline was seen in iShares Nasdaq Biotechnology ETF.
According to Jack Ablin of BMO Private Bank, a lot happened during the third week of January, making the investors little more cautious. He cited an example of a confrontation between populism and globalization in Davos. The event in question was the yearly meeting of World Economic Forum.
Investors have taken the many comments made by Trump as motive that the new President-Elect may not be open to a number increases in interest rates. He is now clearly averse to a strong dollar. According to Peter Cardillo of First Standard Financial, although it is estimated that earnings will be up to expectations, the markets could be keen on initial days of Trump presidency- resulting in volatility. This view was echoed by Paul Nolte of Kingsview Asset Management. He said that the markets continue to search for clarity on the agenda set up by Trump administration.