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“Wanting alone doesn’t get anything done.” – Bobby Knight

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S&P 500 futures are indicated about 0.30% higher, but it’s going to take a gain of more than 1% for the market to extend its six-week streak to seven. It’s an especially painful morning for shares of Capri Holding (CPRI) where shares are down close to 50% after a judge blocked the proposed merger with Coach parent Tapestry (TPR), siding with the FTC’s argument that it would reduce competition in the ‘accessible luxury-handbag category’. Talk about a vital sector of the US economy!

Speaking of the US economy, Durable Goods Orders declined 0.8% while August’s report was also revised down to 0.8%. Ex Transportation, September’s report came in at 0.4% versus expectations for a decline of 0.1%. Last month’s report was also revised up to 0.6% from 0.5%.

In Europe, it’s been a mostly negative morning for stocks as major markets over there look on pace to finish the week off with gains of just over 1%.  Various measures of business sentiment came in mixed relative to expectations, but PPI in Spain cratered 5.2% y/y compared to a decline of 1.3% in August.

In yesterday’s email, we noted the consistent strength in shares of T-Mobile during the trading day as the stock has closed higher than it opened on 24 of the last 25 trading days. We’ve seen a similar level of persistent buying for the US Dollar Index over the last four weeks.

On 10/17, the index had a streak of 14 straight trading days where it closed higher than it opened. Dating back to 1990, that was the longest streak on record. The next longest streak was 13 trading days ending in August 1997 just ahead of the Asian currency crisis.

Through yesterday, the Dollar Index had closed higher than it opened on 18 of the prior 20 trading days which was tied with the August 1997 period for the most in a 20 trading day period since at least 1990.

Despite the consistent strength in the Dollar Index, its performance over the last 20 trading days, while impressive, hasn’t been anywhere near a record. As shown in the chart below, there have been several periods since 1990 when the index rallied more than the current 3.7% over four weeks with the most recent occurrence just over two years ago near the lows of the bear market in September 2022.

When it comes to the dollar’s impact on the stock market, over the last 20 trading days, the S&P 500 has rallied just over 1.25%. Leading the way higher, Financials have rallied 4.3% which makes sense given the sector has a high level of domestic exposure. The next two best-performing sectors, however, Technology and Energy, both have high levels of international exposure, so all else equal, a strong dollar would be negative for those sectors.

At the other end of the spectrum, Health Care is another sector with a high share of domestic exposure, but it is still the worst-performing sector over the last four weeks.  Materials and Consumer Staples, however, both have high levels of international exposure, so their weakness as the dollar has rallied makes sense.