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Friday, October 8, 2010

WALL STREET >>> Rebounding Dollar Blocks Dow 11000

Stocks In Limbo Ahead of Earnings, Payrolls
Despite new data revealing a surprise slide in weekly jobless claims, the Dow's drive to 11000 ran into resistance on Thursday as the U.S. dollar rebounded and the markets play it safe ahead of a pair of crucial new reports. After flirting with crossing the 11000 level for the first time since May, the Dow retreated as the rebounding dollar sent commodities tumbling and the markets anxiously await kickoff to earnings season and the government's all-important jobs jobs for September.

“We all know what’s coming tomorrow. We’re going to get bad news. The question is how bad is the news going to be? commented a floor dealer in NYSE. “It’s just become the norm where bad news has become acceptable news.”

"Caution" was the keyword on Wall Street today, with traders holding their breath ahead of a pair of highly anticipated reports. Blue chip aluminum giant Alcoa (AA) will unofficially kick off third-quarter earnings season this evening, while the government will unveil its nonfarm payroll numbers for September bright and early tomorrow morning. With these major market catalysts just over the horizon, traders seemed relatively unmoved by today's economic reports -- which included generally upbeat retail sales figures, as well as stronger-than-expected jobless numbers from the Labor Department.

Against this backdrop of breathless anticipation, only the Nasdaq Composite (COMP) was able to eke out a daily gain, with the tech-rich index bouncing back from yesterday's drubbing.

Traders were less than impressed, but Senior Technical Strategist Ryan Detrick described today's unemployment data as "a very good sign for the state of the jobs market." He explained, "Initial weekly claims finally dipped beneath 450,000, after trending between 500,000 and 450,000 since last November. The key now is whether this number can stay beneath 450,000 and work its way down to 425,000."
The Dow Jones Industrial Average (DJIA – 10,948.58) peaked near 11,000 right out of the gate, but spent the rest of the session backing away from this technical milestone. The blue chip barometer ended on a loss of 19.1 points, or 0.2%, as 18 of its 30 components closed lower. Alcoa paced the decliners ahead of its turn in the earnings spotlight, while telecom titans AT&T (T) and Verizon (VZ) also swallowed significant losses. Home Depot (HD) closed flat for the second consecutive session, while General Electric (GE) led the charge for the 11 advancing blue chips.

The S&P 500 Index (SPX – 1,158.06) gave up 1.9 points, or 0.2%, but -- just like the Dow -- remains well north of its 10-day moving average. Finally, the Nasdaq Composite (COMP – 2,383.67) bucked the day's bearish bias by adding 3 points, or 0.1%. The COMP briefly dipped into the red around midday, but rebounded after finding support near its own 10-day trendline.

Wall Street continues to closely track the path of the U.S. dollar versus the euro, which lit an early spark under the markets by posting solid gains. A weaker dollar tends to lift commodities and multinationals like Intel (INTC: 19.40 ,+0.10 ,+0.52%) that stand to gain from cheaper exports.

However, those gains fizzled, with the euro down 0.14% to $1.3910 as U.S. markets closed. Hurt by the currency fluctuations, crude oil dropped $1.56, or 1.87%, a barrel to $81.67. After hitting fresh all-time highs early on, gold suffered its steepest loss since late July, sliding $12.50 a troy ounce, or 0.93%, to $1,333.90.

Crude futures surrendered some gains today, backing away from Wednesday's five-month peak as the U.S. dollar surged. The greenback bounced back from an eight-month nadir, with analysts attributing the rebound to last-minute positioning ahead of tomorrow's key jobs report. By the close, crude oil for November delivery shed $1.56, or 1.9%, to end at $81.67 per barrel.

Gold futures also declined, as traders seemed unwilling to push the malleable metal any further into record-high territory ahead of Friday's critical economic data. Gold for December delivery wrapped up the day on a modest deficit of $12.70, or 0.9%, to finish at $1,335 per ounce.

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