US Stocks positive as Dollar strengthens

The week ending November 18 saw US stock markets ending up as Wall Street slides into a holiday filled week. The third week will be about analyzing economic data. There will also be a renewed scrutiny of the resurgent US dollar along with the rising interest rates. Competing forces rocked Wall Street in November as the Russell 2000 index, a stock index concentrating on small companies, went on continuing its excellent streak, blowing past 11 sessions. NASDAQ also exhibited a spectacular performance, making an intra-day record on November 18.

Mixed week for stocks

For stocks, the week was a mixed one. The NASDAQ went 12.46 points or 0.2 percent down to 5321.51 before it finally closed. However, it also set an interim intraday peak of 5346.80. There was a drop of 5.22 points or 0.2 percent in the S&P 500 to 2181.90. It, however, remained in touching distance of its record 2190/15 it set on August 15. The DJIA or Dow Jones Industrial Average closed down to 18,868, a dip of 35.89 points or 0.2 percent. The week witnessed gains posted by all the important indexes.

Stocks were pushed towards peak highs by the election victory of President Elect Donald J. Trump. He is supposed to back policies friendly towards growth. There was subdued trading on November 18 as investors became cautious and concentrated on remarks made by Janet Yellen, the Chairperson of the Federal Reserve. Her remarks pointed out to a possibility of a rise in the interest rates in December. Although the Federal Reserve increased key interest rates during December 15, it continues at extremely low levels and have contributed to the boom in stock markets around the world for a number of years. Details of the meeting held in the Federal Reserve on November 1 and November 2 will be published on November 23.

Cause and caution

The rally in stocks was made possible by huge rotation of money out from bonds and into stocks. Flow of funds to the US exchange traded funds and stock mutual funds clocked a total exceeding $25 billion during the November 10 to November 16 week.

Hostile conditions are however not far away. The US dollar has appreciated and there is a sell-off in the American bond market. All these factors pushed to the yield of 10 year Treasury note to its highs. The yield, it is to be noted, moves opposite to the direction of price. The high of 2.351 percent was achieved on November 18. This is the highest from December 4, 2015.

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