Interesting day in the markets with the dollar falling to record levels, oil ripping higher and a pop in gold and other metals, all fanning inflation jitters.
Stocks were not nearly as exciting with the Dow finishing off 48 at 13,766.
And They Call Their Currency Loonie!
For the first time since November 1976, Canada's dollar reached one-for-one parity today with the U.S. dollar. O Canada! They aren't alone either. The dollar is in a fairly stiff, across-the-board sell-off today against the euro, the yen and the British pound.
These kind of moves are attention-getting, so we asked Miller Tabak's Tony Crescenzi what he thinks about the move and the worries of some in the markets that it's all a sign of building inflation, despite those tame consumer and producer price reports this week.
Crescenzi said the dollar, down nearly 1% today against a basket of currencies, has been in a weakening trend for more than 20 years. He said the dollar slide has been an advantage for the trade deficit, which has been moving sideways since peaking at $68 billion in August 2006.
Today the dollar was at an all-time low against the euro, falling to a rate of $1.40 against the European currency. As the dollar fell, gold and other metals rose. Gold finished the day up $10.40, or 1.4% to $732.40 per troy ounce.
"The dollar probably won't fall in perpetuity. It probably shouldn't cause worry. Both deficits are falling -- budget and trade deficit. This means we don't need as many dollars from abroad to finance our consumption... and also, trade is a smaller part of the U.S. economy than other economies, so the dollar's move is not all that problematic," Crescenzi said.
"In the inflation process, only about 10% of the story is represented by commodities. Seventy percent is represented by labor. Whether or not we get significantly more inflation depends more on labor market pressures. Will there be a lot more inflation because of this? Probably not."
We also listened with interest to comments from Audrey Kaplan, senior portfolio manager of Federated's Intercontinental A Fund . On "Power Lunch," she said this dollar decline has been expected. Of course, her very job makes her a proponent for investing in foreign markets, but she sees opportunities for outperformance for stock markets in Europe -- specifically Germany, Italy and France -- because of a stronger growth story there.
"I think it would be very difficult right now for the dollar to suddenly change course," said Kaplan. "I think it will be range-bound. The risk is to continue lower. Either way, that's good for U.S. investors investing overseas."
John Kilduff, a CNBC contributor and senior vice president at MF Global , had oil pegged this summer. He told us in July it would hit $83 per barrel and it rose above that number for the first time today. It's funny, as we kept asking Kilduff about that call, even as oil fell a couple weeks ago -- and he stuck to his forecast.
So now, we asked about his next forecast, and he thinks oil is reaching a top. (That would support his previous forecast that oil will be way lower than current levels at the end of the year.)
"The components that we had used to price in and forecast this level have obviously come to fruition. Some of the demand destruction should begin to occur," he said.
"I think at this point, the market is severely overbought and the steepness of this run-up really begs for a correction of some magnitude."
Kilduff also think gasoline is ready to start rising along with higher oil prices. Gasoline rose 2% to $2.1351 at the NYMEX .
Don't be Confused!
Oil's big move up today came from supply concerns and the slump in the dollar, but also as the current futures contract expired. The October contract settled at $83.32 after appearing to hit a high of $84.10. The November contract was trading at $81.64 per barrel this afternoon, so when that takes over as the front month, oil could be around that level in tomorrow's trading, depending on its action overnight.