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Dollar Rally Lifts Stocks and Bonds Amid Inflation Concerns

Strategic Insights

— 2 min read

The dollar's rise to a two-week high helped lift stocks and bond prices, benefiting blue chips like AT&T and General Motors, pharmaceutical companies like Warner Lambert and Bristol Myers, and high-technology companies like Microsoft and Oracle. However, the rally may be short-lived, as a negative inflation surprise from the April producer and consumer price indexes could send dollar, bond, and stock prices tumbling.

Key Takeaways:

  • The dollar rallied to a two-week high, lifting bond prices and thus stocks after four straight declining sessions.
  • Blue chips like AT&T and General Motors, pharmaceutical companies like Warner Lambert and Bristol Myers, and high-technology companies like Microsoft and Oracle benefited from the rally.
  • The rally may be short-lived, as a negative inflation surprise from the April producer and consumer price indexes could send dollar, bond, and stock prices tumbling.
  • Currency speculators may be joining in the bond and stock markets' consensus that the Federal Reserve Board will raise interest rates decisively as an inflation-fighting action.
  • The German and Japanese central banks cut money market interest rates, making the dollar more valuable.
  • The yield on the benchmark 30-year Treasury bond fell to 7.49 percent, a decrease of 14 basis points.
  • The Dow Jones industrial average rose 27.37 points to 3,656.41, while the broader Standard & Poor's 500 rose 3.69 points to 446.01.
  • AT&T and General Motors led the Dow industrials, rising 1 3/4 and 1 5/8, respectively, with no discernible news.
  • Exxon and Procter & Gamble also led the S&P 500, rising 3/4 and 1 1/8, respectively, with no discernible news.

Statistics:

  • The dollar rose to 104.42 yen, up 1.62 yen from the previous day's close.
  • The yield on the benchmark 30-year Treasury bond fell to 7.49 percent, a decrease of 14 basis points.
  • The Dow Jones industrial average rose 27.37 points to 3,656.41.
  • The broader Standard & Poor's 500 rose 3.69 points to 446.01.
  • The smaller-company Nasdaq composite index rose 2.04 points to 725.
  • The New York Stock Exchange composite index rose 1.61 points to 246.94.
  • Volume on the New York Stock Exchange was normal at about 295.6 million shares changing hands.

Sources:

  • New York Times
  • Swiss Bank Corporation
  • Federal Reserve Board
  • M. D. Sass Investors Services
  • Dow Jones industrial average
  • Standard & Poor's 500
  • New York Stock Exchange
  • American Stock Exchange

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