Stronger U.S. Dollar Index Stalls ISM Euphoria
The major stock indexes were all trading lower on the day before the ISM data was released. Once the ISM number was released the major stock indexes surged sharply higher. The Institute for Supply Management said that the index declined to 50.6% in August from 50.9% in July. While this ISM number is the worst number in quite a long time it is better than expected. More importantly, the U.S. Dollar Index has soared higher after the announcement, this is the reason why stocks have deflated from that initial move higher in the market.
When the U.S. Dollar Index trades higher on the session it is prudent to expect commodity and energy stocks to pullback. Leading stocks such as Freeport McMoRan Copper & Gold Inc.(NYSE:FCX), Southern Copper Corp.(NYSE:SCCO), and Cliffs Natural Resources Inc.(NYSE:CLF) have all pulled back from the intra-day highs. Should the U.S. Dollar Index decline or pullback throughout the trading session then these leading commodity stocks are likely to bounce higher. All traders should be watching the U.S. Dollar Index very closely.