US close: Trump's currency jabber jars stocks and dollar
Despite a solid start to earnings season, US stocks and the dollar were both sent reeling by remarks from President-elect Donald Trump that the greenback was "too strong".
The Dow Jones Industrial Average and S&P 500 both closed down 0.30% to 19,826.77 and 2,267.89 respectively, while the Nasdaq composite was down 0.6% to 5,538.73 on the day US markets reopened after Monday's holiday for Martin Luther King Jr Day.
Meanwhile the dollar lost 3% to the pound to 1.2414, gave up 1% on the euro to 1.0712 and 1.3% on the yen to 112.614, in fact falling against every G-10 currency pair and with Blackrock saying the dollar has now lost roughly a third of its post-election gains.
Analysts noted that fall in the dollar saw a number of significant price levels give way in the forex market, including EUR/USD touching 1.07 for the first time since early December and USD/JPY falling beneath 113 to a six-week low.
Investors booked out from the currency on Tuesday after Trump said US companies could not compete with China "because our currency is too strong - and it's killing us," in an interview with the Wall Street Journal.
Also putting pressure on the dollar and stocks was a continued lack of clarity on the President-elect's election promises on fiscal policy, which had included lower taxes, less regulation and more infrastructure spending.
Jasper Lawler at London Capital Group said: "The 'Trumpflation' trade has been looking especially deflated since The Donald’s first press conference as President-elect. There is significant execution-risk on the new administration’s policies, and that’s once we even know what they are. We believe this dollar correction has further to go."
The effect of Trump's comments on Cable and possibly even US stocks was exacerbated by a speech by Prime Minister Theresa May in which she clarified her negotiation priorities, including that Britain would seek to leave the European single market in order to curb immigration from the EU and forge new trade deals. She also said that the final Brexit deal will be put to a vote in both houses of parliament.
Back across the Atlantic, New York Federal Reserve president William Dudley said that a strong greenback would put downward pressure on prices and that inflation was “not a problem”.
He said the risk that the Fed will “snuff out” economic expansion anytime soon seems low because “inflation is simply not a problem” and that the pressure on labour resources was increasing “quite slowly".
"The recent strengthening of the dollar will put downward pressure on import prices and limit the ability of domestic producers to raise their prices," he said.
On the data front, the Empire State manufacturing index came in at 6.5 in January from 7.6 in December, suggesting that business activity in the Big Apple grew modestly. This was below the 8.5 expected.
Oil prices were choppy as the dollar moved and Saudi Arabia said crude oil supply may be rebalanced within Opec's 6-month production cut window. West Texas Intermediate was up 0.3% to $52.53 a barrel, while Brent crude was down 0.6% at $55.5.
In corporate news, even Morgan Stanley's expectations-beating trading up, reporting an 83% surge in fourth-quarter earnings that was the bank’s strongest since the financial crisis, was not enough to prevent a sell-off in the financials sector.
Deutsche Bank agreed to pay a $7.2bn settlements, one of the largest ever fines, for misleading investors in its sale of residential mortgage-backed securities in the run up to the financial crisis.
Elsewhere, United Health gained strongly as its fourth-quarter earnings beat analysts’ expectations.
Tiffany lost some lustre as it announced a 4% drop in same store sales over the holiday period.
However, despite his effect on the markets on Tuesday, Trump's big talk has been spawning numerous corporate announcements about investment in the US.
Wal-Mart rose after the retail giant said it will create 10,000 US jobs this year.
Carmaker General Motors edged forward after announcing it will invest $1bn in the country’s manufacturing sector to make 7,000 jobs.
Monsanto and German-owned Bayer announced they will spend at least half of their $16bn agriculture research and development budget in the US over the next six years, following a meeting with the President-elect.
Dow Jones - Risers
Wal-Mart Stores Inc. (WMT) $68.42 1.92%
Procter & Gamble Co. (PG) $85.21 1.43%
Nike Inc. (NKE) $53.65 1.38%
Exxon Mobil Corp. (XOM) $87.35 1.17%
McDonald's Corp. (MCD) $122.76 1.03%
Coca-Cola Co. (KO) $41.22 0.83%
Apple Inc. (AAPL) $119.97 0.79%
Home Depot Inc. (HD) $135.93 0.66%
Verizon Communications Inc. (VZ) $52.74 0.36%
Travelers Company Inc. (TRV) $117.46 0.35%
Dow Jones - Fallers
JP Morgan Chase & Co. (JPM) $83.52 -3.63%
Goldman Sachs Group Inc. (GS) $235.74 -3.50%
Pfizer Inc. (PFE) $32.06 -1.41%
Merck & Co. Inc. (MRK) $61.48 -1.38%
Caterpillar Inc. (CAT) $93.57 -0.96%
E.I. du Pont de Nemours and Co. (DD) $72.97 -0.86%
Boeing Co. (BA) $157.67 -0.73%
Unitedhealth Group Inc. (UNH) $160.66 -0.70%
General Electric Co. (GE) $31.27 -0.29%
Microsoft Corp. (MSFT) $62.53 -0.27%
S&P 500 - Risers
Noble Energy Inc. (NBL) $40.05 7.11%
PVH Corp. (PVH) $94.83 6.18%
NRG Energy Inc. (NRG) $15.34 5.07%
Mattel Inc. (MAT) $30.91 4.71%
Tenet Healthcare Corp. (THC) $18.99 4.23%
Ralph Lauren Corp (RL) $89.58 3.78%
Hanesbrands Inc. (HBI) $22.85 3.63%
Dollar Tree Inc (DLTR) $79.51 3.09%
Reynolds American Inc. (RAI) $57.67 3.06%
Constellation Brands Inc. Class A (STZ) $153.73 2.98%
S&P 500 - Fallers
Comerica Inc. (CMA) $65.34 -6.51%
Navient Corporation (NAVI) $15.77 -6.41%
Regions Financial Corp. (RF) $13.78 -6.13%
Citizens Financial Group, Inc. (CFG) $34.12 -5.98%
Zions Bancorporation (ZION) $41.77 -4.74%
Keycorp (KEY) $17.71 -4.68%
Fifth Third Bancorp (FITB) $26.03 -4.62%
Bank of America Corp. (BAC) $22.05 -4.17%
PNC Financial Services Group (PNC) $113.99 -4.09%
QUALCOMM Inc. (QCOM) $64.19 -4.02%
Nasdaq 100 - Risers
Mattel Inc. (MAT) $30.91 4.71%
Dollar Tree Inc (DLTR) $79.51 3.09%
Charter Communications Inc. (CHTR) $306.30 2.64%
Cerner Corp. (CERN) $52.57 2.38%
NetEase Inc. Ads (NTES) $243.08 2.27%
Liberty Interactive Corporation - Series A Liberty Ventures (LVNTA) $40.56 1.94%
Express Scripts Holding Co (ESRX) $73.16 1.89%
Tractor Supply Company (TSCO) $77.36 1.72%
Hasbro Inc (HAS) $85.17 1.56%
Liberty Global Plc Lilac Class C (LILAK) $22.18 1.51%
Nasdaq 100 - Fallers
QUALCOMM Inc. (QCOM) $64.19 -4.02%
Incyte Corp. (INCY) $113.64 -3.49%
Autodesk Inc. (ADSK) $78.62 -3.32%
Nvidia Corp. (NVDA) $101.11 -2.24%
Celgene Corp. (CELG) $114.99 -2.12%
Microchip Technology Inc. (MCHP) $64.94 -2.11%
Biomarin Pharmaceutical Inc. (BMRN) $85.21 -1.97%
Vertex Pharmaceuticals Inc. (VRTX) $81.55 -1.95%
Micron Technology Inc. (MU) $21.75 -1.94%
American Airlines Group (AAL) $46.75 -1.89%