Monday Morning Musings: Are Dollar v. Stocks Decoupling?

The market is getting a nice bounce this morning, and is doing so without the benefit of a weaker dollar. For months, the relationship between a declining dollar and rising stocks has been firmly in place. But lately we've seen this relationship begin to loosen. Today is one of the larger gains we've seen in the stock market on a day when the dollar was under pressure. I know its still very early in the day, but maybe we are beginning to see this trend decouple?

There were a couple of better-than-expected earnings reports from the likes of Walgreens (WAG) and ConAgra (CAG). Also, Sanofi-Aventis (SNY) agreed to pay $93.50 in cash for Chattem (CHTT) causing the stock to spike +32% higher this morning. Nice.

Among the sector SPDRs, materials (XLB) and energy (XLE) are the strongest, but all 10 sectors are higher so far. Healthcare is also garnering some support from the news that the Senate Democrats are closer to moving past Republican objections to health care reform.

Gold is lower near $1106 on the weaker dollar, but oil is up a bit to $74 ahead of tomorrow's OPEC meeting.

Asian markets were mixed to lower overnight; the 10-year yield is higher to 3.63%, its highest level since August; and the VIX is down another -4.3% to 20.72.

Trading comment: No change to recent trading comments/strategies and my near-term outlook. I still think the stair-step higher market is intact, and picking away at select stocks and etfs (tech, biotech, healthcare, ag) on weakness works. The Nasdaq is breaking out to new highs today, and that should keep growth stocks in favor. Trading volumes are likely to slow as the Christmas holiday nears, but the old Santa Claus rally looks like it may have started already.