The stock market was weak today from the opening bell. First the stock market had a poor reaction to earnings from Apple Inc.(NASDAQ:AAPL), and International Business Machines Corp.(NYSE:IBM). Then the Chinese government raised interest rates by a quarter basis point. This caused a spike in the U.S. Dollar Index which in turn triggered a sell off in the markets. While this is certainly bearish news it gets worst for the inflation bulls. Bank of America is getting sued by Pimco, BlackRock Inc.(NYSE:BLK), and the New York Fed to buy back $47 billion in mortgage back securities.
Didn’t the former CEO of Bank of America Ken Lay say that he was forced by the Federal Reserve to buy Countrywide Financial ? Oh well, now it’s the new CEO’s problem. There must be other financial firms such as J.P. Morgan Chase(NYSE:JPM), and Wells Fargo & Co.(NYSE:WFC) in the same boat as Bank of America. However, at this time the lawsuit is Bank of America specific.
While the banks have been weak lately today’s decline really comes as the U.S. Dollar Index rallies. The U.S. Dollar Index is trading higher by $1.36 to $78.30. The last time the U.S. Dollar Index has spiked like this was on August 11th, 2010. Whether or not this is a one day event or something more we shall see. Continue to keep that U.S. Dollar Index chart front and center as this is the most important chart at this time. When the dollar rallies the markets deflate and sell off. The opposite is true when the U.S. Dollar Index declines as the markets will inflate and trade higher.
