Dow Ekes Out a Gain as Weaker Dollar Bails Out Stock Market Bulls

• The Dow Jones rose on Monday, though it lagged far behind the S&P 500 and Nasdaq.
• A weak U.S. dollar helped to bump the stock market higher.
• A big rally in Apple stock offset substantial losses from other Dow 30 components.

A flagging U.S. dollar helped buoy the Dow Jones to start the week. The rally secured further aid from a flurry of vaccine news and plenty of upbeat punditry from White House economic advisor Larry Kudlow.

Stimulus negotiations are on every investor’s mind, but the stock market’s most critical economic event this week will be the Fed’s policy meeting.

Dow Ranges Higher as Dollar Weakens

After hesitating during midday trading, the Dow Jones clawed back toward session highs ahead of the closing bell.

As of 3:46 pm ET, the Dow had gained 99.55 points or 0.38% to rise to 26,569.44.

The Nasdaq headlined the stock market with a 1.66% surge to 10,535.63. The S&P 500 advanced 0.72% to 3,238.87.

There wasn’t much pertinent U.S. economic data today , though core durable goods orders slightly missed expectations.

A high-tier German business climate index (IFO) beat forecasts. This imposed pressure on the U.S. dollar by reaffirming many investors’ views that Europe could be poised to emerge from the pandemic stronger than the United States.

A dramatic spike in Spanish coronavirus cases is a potential threat to this storyline.

Conversely, a weak dollar could load the Dow with more ammunition  as it struggles back toward parity for the year.

At a basic level, a weaker dollar nominally inflates earnings for U.S. multinational companies, which will still report results in USD.

More significant is that a weak dollar will both increase demand for exports and ease the burden of USD-denominated debt throughout the world.

The Federal Reserve knows this, and it has been their mission since the pandemic began to kill “King Dollar.”

It’s hard to squash the world’s reserve currency, but QE infinity  and zero interest rates are potent weapons.

Given the material impact of Fed policy on equity prices, the stakes are high for this week’s FOMC meeting.

Investors have been partially pricing in negative interest rates, though Federal Reserve Chair Jerome Powell is unlikely to want to rock the boat too much.

As ING economists explained in a report today:

Financial markets continue to price in the possibility of negative interest rates, but officials have been dismissive of this, and within the press conference Jay Powell will suggest they are not an attractive option. Instead, this pricing behavior is more likely to be some traders hedging positions rather than a conviction the Fed will take this step.

Moderna & Kudlow Play Tag Team to Boost Sentiment

The number of U.S. virus cases continues to rise at a worrisome rate, though not at the frenetic pace of the last few weeks. 

Positive vaccine news invariably moves stocks higher, and it was Moderna’s turn to stoke risk appetite  today.

Adding to the updraft on the stock market, the White House’s resident cheerleader, Larry Kudlow, sung the economy’s praises in a Fox Business interview. He even refused to concede that a V-shaped recovery is off the table.

Dow 30 Stocks: Apple Leads, Caterpillar Continues to Climb

On an unspectacular day for the Dow 30, the index was split roughly evenly between gains and losses.

Apple stock was back in pristine form, securing a 2.4% recovery that ranked it among the top performers in the DJIA. The move came despite Wall Street warnings that better earnings could already be priced in. 

Dow Inc. led the index with a 3% rally after China posted robust industrial data over the weekend. This likely contributed to global growth bellwether Caterpillar’s 1.4% jump as well.