Market Reflections 8/17/2009

Traders were at loss to pin point why markets fell so steeply on Monday. Explanations included a delayed reaction to last week's disappointments for retail sales and consumer confidence along with reaction to weekend TV reports that the back-to-school season will be a flop. But Monday's hard economic data were very positive including gains for the Empire State and homebuilder reports and a big jump in the Treasury International Capital headline showing strong foreign demand for U.S. financial assets. Yet markets dropped anyway though in very thin volumes, a factor that often exaggerates swings. The S&P 500 fell 2.4 percent to 979.73 sparking talk of 950 as the next big level. The dollar gained as overnight losses in Asian stock markets tripped a run of risk aversion. The dollar index rose 0.6 percent to 79.29. Dollar strength and talk of economic weakness eased inflation premiums, reflected in commodities where prices fell back. Copper fell 7 cents to $2.74/lb while oil fell 75 cents to $66.75.