The Dollar May Pose The Biggest Risks To Stocks
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The Dollar May Pose The Biggest Risks To Stocks

October 5, 2020

STOCKS – NVDA, COST, SHOP

Macro – FXE, UUP

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Not great follow through this morning with most major markets trading around the flat region. The S&P 500 is trading lower by about 10 bps, while the Qs are trading down around 20 bps. Not much in the way of newsflow moving the markets today, just more of a modest pullback following yesterday’s strong move higher. 

Euro (FXE)

I noticed this morning that the ECB might be ready to inject a fresh round of liquidity into the system and potentially cut rates. The bigger potential impact is the effect this is likely to have on the euro, which was reached almost 1.2 to the dollar. A weaker euro is something that would help the region fight off deflationary forces and help with growth.

Dollar Index

The more important piece is the effect this is likely to have on the dollar, which means it goes stronger. A stronger dollar is negative for the risk asset classes of the market. We have already seen some of the effects of a strong dollar over the past few weeks. Should the dollar begin to strengthen further, it is likely to weigh even more. 

Nvidia (NVDA)

Nvidia received many price target increases today following its GPU technology conference. I’m really not sure how much more Nvidia should be worth because it is already pretty lofty prices. The stock remains to move higher, in this nearly perfect trading channel. Until the uptrend breaks, it seems like it is hard to be against this one. 

Shopify (SHOP)

Shopify’s price target was raised at KeyBanc today $1,250 from $1,150. The stock appears to be in the middle of a broadening wedge, with room to go to around $1,200. 

Costco (COST)

Costco was upgraded to buy with a $400 price target at Barclays. The stock appears to be in a consolidation mode at the moment, moving in a wide sideways range. 

That is all for now. 

Mike

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