Euro Rally Supports U.S Equities

U.S. stocks opened higher Monday and the benchmark S&P 500 rebounded after three weeks of losses as the euro strengthened against the dollar, easing some concerns over the impact of a robust greenback on corporate earnings.

Investors have been cautious ahead of a U.S. Federal Reserve statement due on Wednesday, when they expect the central bank to give a clearer signal on the timing of its first interest rate hike in almost a decade.

The S&P 500 has fallen 2.7 percent in the last three weeks, including a 0.9 percent drop last week. The Dow lost 0.6 percent last week while the Nasdaq declined 1.1 percent.

A recovery in the euro was reassuring investors, said Nick Colas, chief market strategist at brokerage Convergex, in New York, as a rapidly rising U.S. dollar would pressure U.S. corporate earnings, especially for multinationals.

“It seems like the currency markets are helping U.S. equities this morning,” Colas said. “What markets are looking for is lower volatility.”

The euro found a foothold against the dollar on Monday, bolstered by concerns expressed by Italy’s central bank governor about the pace of its fall to 12-year lows, as the European Central Bank launched quantitative easing.

At 9:36 a.m., the Dow Jones industrial average .DJI rose 117.84 points, or 0.66 percent, to 17,867.15, the S&P 500 .SPX gained 13.21 points, or 0.64 percent, to 2,066.61 and the Nasdaq Composite .IXIC added 25.14 points, or 0.52 percent, to 4,896.90.

Manufacturing activity in New York State slowed in March for a second month as the pace of new orders contracted to its weakest since November 2013, a New York Federal Reserve survey showed on Monday.

U.S. manufacturing output fell in February for a third month as automobile production tumbled, pointing to slower economic growth in the first quarter.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell