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May 17, 2018

The Wall Street Journal | MoneyBeat - may 17,2018 | The Dollar Rally Has Its Skeptics

The Wall Street Journal

The Dollar Rally Has Its Skeptics

By Chelsey Dulaney
Morning MoneyBeat is the Journal’s pre-market primer. To receive the newsletter via email, click here.
Market Snap at 05/17/2018 07:49:21 AM ET
S&P 500 Futures -0.14%
DJIA Futures -0.05%
U.S. 10 Year -1/32
WSJ Dollar Index 0.11%
Crude Oil 1.01%
Gold -0.26%
FTSE 100 0.27%
Nikkei 225 0.53%
DAX 0.29%
Hang Seng -0.54%
CAC 40 0.38%
Shanghai -0.48%

Overnight Developments

  • Global stocks struggled for traction Thursday as government bond yields and oil prices hit multiyear highs. S&P 500 futures pointed to a 0.2% drop at the open.
  • The Stoxx Europe 600 gained 0.2%
  • Earlier, Asian indexes were mostly lower, though Japan’s Nikkei rose 0.5% on a decline in the yen. Hong Kong’s Hang Seng fell 0.5%.
  • The Breakfast Briefing

    The U.S. dollar’s recent resurgence has yet to convince some bearish investors.
    The greenback has rallied about 4% over the last month against a basket of peers tracked by The Wall Street Journal. That comes as investors grow increasingly confident that the Federal Reserve will pick up the pace of interest rate increases this year amid strong economic growth, helping draw investors back to the U.S.
    But not everyone expects the dollar’s comeback to last. Analysts at OppenheimerFunds are sticking to their call for a weaker dollar over the next few years. Among their reasons for staying bearish: the widening U.S. budget and trade deficits will likely weigh on the currency, while growth abroad should outshine the U.S.
    Morgan Stanley also continues to expect a weaker greenback, warning last week that the dollar’s rally was “nearing completion.”
    The dollar’s unpredictability has been a source of frustration for many on Wall Street in recent years. The currency fell 7.5% last year--its worst annual performance in a decade--defying investors who had expected solid U.S. economic growth, rising U.S. interest rates and fiscal stimulus to boost the currency.
    Analysts say the dollar was hurt by investors’ optimism surrounding growth in Europe and emerging markets, which overshadowed the steady U.S. expansion.
    Recently, growth momentum has shifted back in the U.S.’s favor, encouraging investors to pull money from stocks and bonds in countries such as Argentina and Turkey to invest in U.S. assets (and thus the dollar). The greenback’s rise was likely accelerated by investors’ big bets against the currency, which they have been unwinding as the currency rises.
    For some countries, the damage done by the dollar’s rise likely won’t quickly fade. Argentina’s peso has fallen nearly 17% against the dollar over the past month, prompting the country to seek a line of credit from the International Monetary Fund to stabilize its economy. Turkey’s lira is down 7% over that period, sending the currency to new record lows and threatening to further stoke inflation.
    Will the dollar rally continue?  Let the author know your thoughts at

    Daily Factoid

    On this day in 1792, the ancestor of the New York Stock Exchange was born as 24 brokers gathered under a tree and signed the Buttonwood Agreement.

    Key Events

    U.S. jobless claims, due out at 8:30 a.m. ET, are expected to tick up to 215,000. That's still a remarkably low level by historical standards.
    The Philadelphia Fed Business Outlook Survey, released at 8:30 a.m., is expected to slip to 21 for May from 23.2.
    An index of leading economic indicators, due out at 10 a.m., is expected to have risen 0.4% in April.
    The U.S. Energy Information Administration is expected to report at 10:30 a.m. that natural gas storage levels rose by 105 billion cubic feet of gas during the week ended May 11.
    The Minneapolis Fed’s Neel Kashkari speaks at Minnesota Housing Finance Agency at 10:45 a.m., and the Dallas Fed’s Robert Kaplan speaks in Richardson, Texas, at 1:30 p.m..
    Japan's consumer price index for April is out Thursday evening.
    House Speaker Paul Ryan said he needs paperwork related to a new Nafta deal by Thursday to have time to consider it in the House this year.

    Stocks to Watch

    Cisco Systems—Down 4%: The networking giant narrowly topped expectations for sales and profits in the most recent quarter but gave projections for the current quarter in line with Wall Street targets.
    Ford—Down 0.1%: Ford said it is restarting production of its F-150 and Super Duty vehicles in the coming days at its Dearborn, Mich., Kansas City and Louisville, Ky., plants after a fire at one of its supplier’s facilities created a parts shortage. The auto maker said it expects the disruptions to hurt earnings in the current quarter but reaffirmed its 2018 guidance.
    Take-Two Interactive—Down 1.6%: Take-Two reported revenue for the most recent quarter below guidance and down more than 20% from the year-earlier period, with the popularity of "Fortnite" from rival Epic Games among the factors hurting the video-game publisher.
    Jack in the Box—Down 3.7%: The fast-food restaurant chain reported weaker-than-expected profits and sales for the most recent quarter, with revenue falling from a year earlier.

    Number of the Day

    The number of records this year for the Russell 2000 index, including Wednesday's fresh high. The small-cap benchmark has been climbing even as multinational firms have lagged.

    Must Reads

    Shale companies have helped propel U.S. oil output to all-time highs, surpassing 10 million barrels a day and rivaling Russia and Saudi Arabia. But American shale drillers are still spending more money than they are making, even as oil prices rise.
    Shari Redstone fired back at CBS, moving to block the company’s efforts to strip her family of voting control. The Redstones’ family holding company dictated a significant change yesterday to how the CBS board operates.
    Google said its YouTube unit will roll out a new music-streaming service, YouTube Music, on May 22.
    A Senate committee backed the conclusion that Moscow tried to boost President Donald Trump’s 2016 campaign by hacking and spreading misinformation. Russia’s alleged role in the election is a central part of special counsel Robert Mueller’s investigation. Trump lawyers had said they aimed to decide by today whether Trump would testify in the probe.

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