Wall Street posted a largely successful week leveraged off the persistent declines in the dollar, as market averages climbed to records despite some unevenness in the trends, but the durability of the advance figured to face a stiff challenge next week:
Ben Bernanke, the dollar’s chief pallbearer and the source of easy money, is slated to talk economy at the start of the week.
His comments certainly don’t have to be any kind of gamebreaker, not by any means. One of the reasons that Bernanke and his colleagues on the Federal Reserve have been so insistent about talking down rates, which has been the locus of pressure on the U.S. currency, has been their concern about the fragility of the economic recovery.
Even though some skeptics have been campaigning to learn when the Fed planned to lift rates off their record lows, and start to mop up some of the liquidity that’s slopped around the U.S. economy, Bernanke has maintained his dubiousness about saying anything that could be interpreted as an intention to back off cheap rates, or raise any worry about even a whiff of inflation.
Meanwhile, heading into the final stretch of the earnings season, the results turned in by corporate America remained stalwart, at least relative to expectations. The measure of outperformance versus the estimates that analysts had been anticipating is likely to go down as the healthiest since anybody started keeping records of such measures more than 15 years ago.
A big measure of the outperformance has come from the companies that generate half or more of their sales from international customers. With the weak dollar helping stoke the appetite for those American products around the globe, many companies have been able to make up for the slow-to-recover domestic demand on the part of tapped-out or unemployment U.S. consumers.
More data about the state of both the state of trade and the sentiment of the consumer cropped up Friday. The trade deficit widened more than had been expected in September, according to the government, as imports of energy products more than offset any bulge in exports. Meanwhile, consumer confidence slumped badly in the first reading for November.
However, the data didn’t provide an obstacle for the bulls in the session, as the Dow Jones Industrial Average (DJI) closed 73 points higher, wiping out most of the ground lost in Thursday’s 93-point setback, to finish at 10270, just off the record reached with Wednesday’s close. The Dow posted gains in seven of the last eight trading sessions.
Among the winners: stocks that put up constructive earnings statements, including Walt Disney (DIS), which gained 5%, Abercrombie & Fitch (ANF), which jumped 11% and reached a high for the year, and J.C. Penney (JCP), ahead 4%.
The campaign of earnings releases slows measurably next week - just a smattering of companies remain, mostly retailers, including Home Depot (HD) and Target (TGT). That could prove to be a headwind for the bulls, as the conclusion of the earnings-release season has, in the two preceding turns, seen the market slip into a modest correction.
The course of the dollar, though, has played an increasingly important role as gatekeeper lately, and may be the ultimate determinant of just how stocks fare over the next several weeks.
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