After bursting out of the gate with a gain of 1% or more in the major averages, stocks have pulled back to virtually unchanged as the dollar continues to rally on increased expectations that the Federal Reserve will raise interest rates by mid-2010.
The Dollar Index, which tracks the greenback against six other currencies, is up 1.1% as fed-funds futures are fulling pricing in an increase in the Fed’s key policy rate to 0.5% by next August from the current 0-0.25%.
Materials stocks are falling under the weight of a stronger greenback. The resource-heavy Toronto exchange is trading down 1.5% as a result.
But Treasuries continue to trade at their lows of the day with the benchmark 10-year Treasury yield at 3.51%, a one-month high.
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