Emerging Markets – Stocks Fall Back On Wednesday

Emerging markets – Wednesday reversed the gains from Tuesday as the S&P 500 was down 0.76%, the Nasdaq was down 1.23%, and the Russell 2000 was down 1.29%. The VIX was up 9.99% to 14.64. The good news is the CNN Fear and Greed index fell to 47 out of 100, which is neutral.

That was a sharp decline from 58 on Tuesday, signaling the correction could be mostly over. In a previous article, I wondered when the dollar’s rally would begin to hurt equities. The answer was given quickly as the market reached a tipping point on Wednesday.

The dollar index was only up 1 cent on Wednesday to $96.67, but the fact that it is at this level is enough to push commodities and stocks lower.

Emerging Markets – Strong Dollar Hurts Emerging Markets & Commodities

As you can see from the chart below, the rise of the dollar has caused the emerging markets currency index to crater. Emerging market stocks have cratered as well as the Vanguard emerging markets index was down 2.93%.

It’s at its lowest level since July 2017. The dollar is beginning to have a widespread impact on the areas you’d expect. Gold was down 1.47% on Wednesday and is now down 10.99% year to date. It’s at an 18 month low. Copper was down 3.5% on Wednesday and is down 22.49% year to date.

It’s fair to say the global economic weakness and the strong dollar are equally problematic for doctor copper. The Bloomberg commodity index was down 1.83%. If this decline continues, headline inflation is going to fall sharply in the fall.

Emerging Markets – Oil Crashes

As expected, the biggest losers on Wednesday were materials and energy stocks which were down 1.55% and 3.51% respectively. Real estate was the best performer as it was up 0.84%. Energy stocks were down because oil prices cratered 3% to $65.01 which is the lowest price since June 6th.

It hit an 8 week intra-day low of $64.51 and it is about to extend its weekly losing streak to 7 weeks. Oil was down sharply because commercial crude inventories rose by 6.8 million barrels when they were expected to fall by 2.5 million barrels.