This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

Chart Advisor: Dollar Rising

Investopedia

Contributor:
Investopedia
Visit: Investopedia

Friday, July 16th, 2021

1/ Markets slip as dollar strengthens 

2/ IBM holding support for now 

3/ Tractor Supply Company trending higher 

4/ The bottom line

1/ Markets slip as dollar strengthens 

Precious metals and stock market indexes fell today, and the U.S. Dollar index (DXY) rose. This movement runs counter to the inflation-influenced trends that have been apparent in 2021 so far.  

Chart watchers will notice that a comparison between gold and silver prices and DXY has shown some unusual activity. The recent positive correlation displayed between metals and the greenback broke apart yesterday and continued today (see chart below). 

The timing of this divergence seems to suggest that investors are reacting to Federal Reserve Chairman Jerome Powell’s testimony before Congress on Wednesday. The implication is clear: investors expect the Fed to raise rates if inflation continues and higher rates will drive demand for dollars. Both stocks and metals are reacting in the same way suggesting this move is more about the dollar than about the other asset classes. 

2/ IBM Holding Support For Now 

International Business Machines (IBM) will announce its earnings Monday with analysts expecting the company to meet an estimate of $2.32 per share, and a revenue of $18.29 billion. It is expected that the company’s Cloud & Cognitive Software and Global Business Systems units will continue to improve through 2021 as IT spend returns, but the rest of its business may struggle. 
 

Usually, the price of IBM is influenced by State Street’s Technology Sector (XLK), where it has a weight of 1.22%. But in the past few trading sessions, we have seen it moving in the opposite direction. In the past year, the company has increased its investment in R&D and CAPEX, and since October has acquired seven companies focused on hybrid cloud and AI. It is also to note that IBM could be a contender in the Pentagon’s new multi-vendor contract, Joint Warfighter Cloud Capability. Over the past 1-year, IBM has given a return of 18.43%, the stock is trading below its 50-day moving average and is down 0.82% in today’s trading. 

The price of IBM looks positioned near recent lows and could break lower if investors don’t like the earnings report. That would signal a continuing downward trend for the tech company. 

share along with a revenue of $3.45 billion. TSCO moves similarly to State Street’s Materials Sector ETF (XLB), and both the stock and the ETF have given similar returns over the past year—35.64% and 38.71% respectively.  

Tractor Supply Company has begun construction on its new $70M distribution center in Navarre, Ohio, which will create more than 375 new full-time jobs by the end of 2023 and service more than 250 Tractor Supply stores at full capacity. The construction is currently scheduled to be completed by Fall 2022. Tractor Supply currently operates 96 stores and employs over 1,700 Team Members across Ohio.  

The stock has been drifting higher into earnings, but a strengthening dollar might provide a significant resistance against a continuing upward trend for TSCO. 

4/ The Bottom Line 

As the dollar rises, stocks and metals slide, suggesting investors are prepping for higher interest rates. That’s going to make it harder for investors to feel confident about stocks like IBM and TSCO even if their earnings news is good. 

Originally posted on 16th July, 2021

Disclosure: Investopedia

Investopedia.com: The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy.  While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Investopedia and is being posted with permission from Investopedia. The views expressed in this material are solely those of the author and/or Investopedia and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

trading top