U.S. stocks and exchange traded funds (ETFs) are in sharply negative territory this morning as the U.S. dollar strengthens and materials prices are pushed lower.
The U.S. dollar gained ground on most major currencies despite expectations that massive U.S. fiscal and monetary stimulus would hasten a decline in the dollar. The sent the PowerShares DB US Dollar Index Bearish (UUP) up nearly 1% in morning trading.
In conjunction with a rising dollar, crude oil dropped for the second straight day. Black gold fell dipped $71/barrel in electronic trading on the New York Mercantile Exchange. In general, crude oil trades inversely to the U.S. dollar. Oil is priced in dollars, so as the dollar weakens, it makes oil and other dollar-denominated assets cheaper for overseas buyers; the reverse is also true. This sent the US Oil Fund (USO) down about 3% in intraday trading.
In an attempt to gather more support for his health care reform, President Barack Obama will urge doctors to support wider insurance coverage and targeted federal spending cuts. The reform anticipates heavy spending to cover the nearly 50 million Americans who lack health insurance. It will also emphasize that current health care programs are too inefficient. The news sent the iShares Dow Jones US Healthcare (IYH) down nearly 2.5% in morning trading.
Foreign demand for long-term U.S. assets seems to be slowing down. The nation’s two largest debt holders, Japan and China, trimmed their holdings of U.S. Treasuries sending the net purchase of stocks, bonds, and notes purchased by all foreigners down to $11.2 billion in April from $55.4 billion in March, reports Martin Crutsinger of the Associated Press. As the United States continues to need more money from foreign investors to fight the recession and rebuild an ailing economy, a weak interest in U.S. assets could potentially send interest rates up.
Overall, the U.S. markets followed all other global markets by trading down. The Dow Jones Industrial Average dropped 2.3%, the S&P 500 declined by nearly 2.5% and the Nasdaq tumbled by 2.8% in morning trading.
For more stories on health care, visit our related category.
Kevin Grewal contributed to this article.