Stocks Steady as Dollar Strengthens
New York (Oct 22) Global stocks were mixed Friday but remained on track for modest weekly gains. Futures pointed to a 0.3% opening decline for the S&P 500 as the dollar rose to multimonth highs against the euro and Asian currencies.
Shares of General Electric Co. fell 0.8% as its oil and gas business continued to weigh on revenue growth in the most recent quarter.
Still, the S&P 500 was just barely on pace to end the week a touch higher, led by the materials, energy and financial sectors. U.S. earnings so far have mostly beat lowered expectations, which analysts said was needed after the broader market climbed to record highs this summer.
Elsewhere, the Stoxx Europe 600 was flat in afternoon trade, while the euro fell 0.4% against the dollar to $ 1.08884 after touching its lowest level since March.
Traders were digesting comments from European Central Bank President Mario Draghi on Thursday, who denied reports that the bank's stimulus program could end abruptly.
The euro had initially risen as Mr. Draghi said the ECB didn't discuss extending its bond-buying program, but those gains were quickly reversed, as investors said his comments left the door open to extending the program at future meetings.
"Mr. Draghi was holding his cards very close to his chest," said Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers. He expects the bank to announce an extension to its bond-purchase program in December.
The euro has fallen over 3% against the dollar so far this month. "The recent move has been quite one-directional," said Jordan Rochester, currency strategist at Nomura, with markets closer to pricing a rate rise in December than they were this time last year ahead of the U.S.Federal Reserve's move.
Parts of the market were also positioned for a euro rally ahead of the meeting in case Mr. Draghi said the bank had discussed winding down its stimulus program, he said.
The dollar remained supported, meanwhile, by growing expectations that the Federal Reserve would raise interest rates in December. The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, was last up 0.2%.
Fed-fund futures, used by investors to bet on central-bank policy, currently suggest a nearly 74% chance of higher rates by the end of the year, according to CME Group.
"We're in the midst of election fever, but for markets central banks are way more important," said Tina Byles Williams, chief investment officer at FIS Group.
Stock markets in Europe were steady Friday as gains in personal and consumer goods offset declines in the auto sector. Shares of British American Tobacco PLC rose over 3% after news hit of its takeover offer, which would create the world's largest listed tobacco company by revenue and market value.
Shares in German luxury car maker Daimler fell 2.3% despite the company beating analyst expectations for third- quarter profits.
Third-quarter earnings in the Stoxx Europe 600 are expected to decline 13% from a year earlier, according to analysts' estimates from Thomson Reuters.
For the week, the Stoxx Europe 600 was on track to gain 1.3%, led by a recovery in the banking sector.
Shares of Deutsche Bank were up 0.7% on Friday, roughly where they traded before news broke that the U.S. Justice Department proposed it pay $14 billion to settle mortgage-securities probes stemming from the financial crisis.
Earlier, stocks in Asia mostly edged lower, catching up with a small decline on Wall Street and oil's biggest daily drop since September. Shares in Japan fell 0.3% Friday but rose 2% this week, while Australian stocks shed 0.2% to end the week flat.
Shanghai stocks inched up 0.2%. The Chinese yuan touched a six-year low against the dollar in trading in mainland China, and a record low in trading outside of China at 6.7663.
The Hong Kong stock market was closed as the city shut down for a typhoon.
In commodities, Brent crude oil last traded up 0.8% at $50.90 a barrel, while gold was flat at $1,267 an ounce.
The yield on the 10-year U.S.Treasury note inched up slightly to 1.752%, while 10-year German government bonds nudged up to 0.013%. Yields move inversely to prices.
Source: NASDAQ
