The Monkey Trade: Dollar Gets Nuked, Run Up Stocks

From Asia to Europe to the Middle East, the global stock market is up anywhere from 0.5 to 1.5 percent.

The good news is that earnings season is off to a strong start with earnings ahead of consensus on JP Morgan, raliroad giant CSX and Intel (which just beat guidancethat was lowered in August). Intel's comments that corporations are spending on technology was widely cited.

The bad news is that the dollar is breaking to new lows, while China's foreign exchange reserves rose to a record $2.65 trillion.

Lots of talk about Jon Hilsenrath's story in the WSJ this morning, noting that Ben Bernanke is likely to lay out the Fed's plan for quantitative easing during a speech he will make at a Boston Fed conference Friday morning, which may include the bank publicly adopting an inflation target of 3 to 4 percent, a proposal Mr. Bernanke floated years ago as a suggestion to deal with Japan's deflationary problem.


1) JP Morgan reported earnings of $1.01, well ahead of the $0.88 consensus, though revenues of $23.82 billion were below consensus of $25.5 billion. Good news: loan loss reserves were reduced by $1.5 billion for the quarter, and they bought $2.2 billion in stock. Bad news: CEO Jamie Dimon said mortgage losses are expected to remain high for the next several quarters.

The key point for traders is that banks have notably underperformed the S&P 500 for the past two months on concerns over weak loan growth and poor trading activity—this report is good but not clear that it is a game changer.

Skeptics continue to argue that revenue growth is not there for banks, we still have regulatory reform and Basel 3 to deal with, the economy is not really growing and MOST IMPORTANTLY, QE2 keeps rates low and the yield curve flat. Both of those aren't great for banks, skeptics argue.

2) Chevron is down about 1 percent after the Dow component warned that its earnings in the current Q3 quarter will be lower than the prior quarter. The oil giant said that lower production, higher expenses from the deepwater drilling moratorium and the weaker dollar all hurt results in the quarter. The company's full earnings report will be released in two weeks.

3) CSX is up 3 percent after beating estimates in a solid earnings report. Not only did volumes increase, but the railroad also realized a 6.6 rise in prices during the quarter. Volumes of auto shipments soared 44%, while intermodal volumes rose 19 percent, chemical volumes rose 5 percent, and coal volumes gained 3 percent.

4) MGM Resorts falls 5 percent after disclosing that Tracinda, its largest shareholder, was reducing its stake in the casino company from 30 percent from 37 percent. Also weighing, the announcement that the firm would sell 41 million new shares in a secondary offering.

Additionally, the firm warned of another quarterly loss, albeit narrower than expected (loss of $0.21 vs. loss of $0.24). Gaming revenues were down 9 percent in the quarter as volumes at table games (excluding baccarat) fell 7 percent.

5) New refinance wave: MBA says refis rose 21 percent to the highest levels since May 2009, but purchases fell by 8.5 percent.

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