Market Perspective for September 29, 2014

Stocks started off in the wrong direction Monday morning after protests in Hong Kong rattled the financial market. The Hang Seng fell 1.90 percent on Monday. China’s National Day is on Wednesday and that could prompt bigger protest crowds. At least in the near term, these protests could weigh heavily on Hong Kong’s stock market. European shares also opened lower in sympathy with losses from Hong Kong.

The key chart to watch this week may be the U.S. dollar index. The rising greenback has socked commodities and stock markets around the globe. Our domestic market has held up well, but this cannot continue indefinitely if the rising dollar continues to beat up the rest of the globe. A reversal is overdue as the U.S. dollar index has been overbought since mid-August. The dollar index has also moved higher for 11 straight weeks, the best win streak since its inception, 41 years ago. The move last week was an acceleration of the trend, which tends to come before a reversal as well.

Data won’t be heavy this week, but investors will focus on the manufacturing PMI numbers from around the globe, with the U.S., Europe and China drawing the most attention. Aside from those numbers, the unemployment rate for September is the other big domestic item. From China, there will be preliminary September home price data from private firms out this week. This will be an important data point for commodities such as copper and iron ore.

We are in a lull period before the third quarter earnings season kicks off. Walgreens (WAG) headlines the earnings reports this week along with Constellation Brands (STZ).

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