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Commodities Rally On Dollar's Weakness

The dollar is again weak this morning, and commodities are rallying: gold and copper are at new highs, while commodity stocks like Rio Tinto and AK Steel are up 4 to 5 percent.

At the same time, the Baltic Dry Index, which tracks the cost of moving major commodities like coal, grain and iron ore by sea, is just shy of a 52-week high (though orders of magnitude from its historic high in 2008).

S&P futures lost a few points at 8:30 AM ET because October retail sales were all over the place: the headline number, up 1.4 percent, better than the consensus of up 0.9 percent, but the figure was worse ex-autos (up only 0.2 percent versus consensus of up 0.4 percent), while September was revised lower (down 2.3 percent from down 1.5 percent).

Elsewhere:

1) Japanese GDP grew 1.2 percent in the third quarter, nearly double the forecast and the fastest pace in more than two years. However, much of this appears to be due to stimulus programs, and the government is already considering additional stimulus measures.

2) Lowe's reported earnings in line with expectation; fourth quarter guidance of $0.09-$0.13 is close to consensus of $0.10. Comp store sales expected to decline 2 percent to 6 percent.

3) Mixed news out of Capital One this morning. Good news: credit card defaults (loans the firm will never collect) fell from 9.77 percent in September to 9.04 percent in October.

Bad news: as unemployment rose above 10 percent in October, delinquent accounts rose to 5.72 percent last month from 5.38 percent in September.

4) Illinois Tool Works is up 1 percent after reaffirming Q4 earnings and revenue guidance inline with current Street forecasts.

After seeing sales declines in the mid 20 percent range for most of the calendar year, the industrial tool and equipment maker reported a more modest 18 percent decline in the 3 months ended October 31. However, steep declines in its biggest segments were still present: industrial packaging down 27 percent, power systems & electronics down 32 percent.

5) U.S. Steel and AK Steel rise 4 percent after JPMorgan adds the two steelmakers to its focus list citing "huge upside earnings leverage." Noting the market has priced in "too negative an outlook" for the firms, it expects steel prices to "rise rapidly" when demand eventually increases due to "severe constraints throughout the U.S. supply chain."

6) General Motors reported a $1.15 billion Q3 loss and announced that it would begin repaying loans to the U.S. and Canadian governments beginning in December. The loss in the past quarter was notably smaller than the $2.6 billion loss in year ago period. CEO Fritz Henderson continues to expect the automaker's IPO in the second half of 2010.

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