Oil, dollar and Fed all converge on stocks

Traders work on the floor of the New York Stock Exchange.
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Traders work on the floor of the New York Stock Exchange.

Dead money. I said stocks would have trouble until we saw the dollar stabilize, or at least stopped the parabolic move it has gone through this month (up almost 6 percent in March).

Today, we not only had the dollar, we had oil moving down, close to the lows in January. Throw in the Fed next week, which will probably drop the language indicating they will be "patient" on when they may raise rates, and it's little wonder stocks are having trouble.

The risk remains on the downside. But even if we went to 2,000 on the S&P 500, which is likely, it's still just another garden variety 5 percent pullback.

The dollar strength/euro weakness is playing havoc in the stock market. First, it is forcing foreign money out of U.S. stocks and into Europe in general.... European markets like Germany, Italy, and France were all up this week, with Germany at historic highs.

It's also playing havoc with companies that have significant operations overseas, including tech companies like IBM and Intel, which underperformed the markets this week.

Intel, which warned of lower revenues for the first quarter, partly due to currency issues, is down roughly 7 percent this week.

Oil reared its ugly ahead again toward the end of the week as it approached the lows we saw in January....oil has been quiet recently, but the combination of increasing supply and the dollar strength is again pressuring prices...the Energy sector overall was far and away the worst performer on the week, down about 3.2 percent.

As for the dollar, I'm amazed we haven't seen more profit taking. I noted yesterday that the Dollar Index was more than three standard deviations away from its 50 day moving average. That is extraordinarily rare: it's happened only 0.3 percent of all trading days since 1986. Almost invariably, the dollar index has been down in the following days, but that is not happening yet.

Truly extraordinary.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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