By Agency Reporter

Tuesday, 9 Nov 2010

The Dow and S&P 500 fell on Monday after hitting two-year highs last week as a stronger dollar weighed on the market although the tailwinds of monetary easing and signs of a stronger economy capped losses.

Reuters reported on Monday, that the dollar traded in a strong inverse relationship to United States equities recently. An unwinding of dollar short positions that began after solid US jobs data last Friday gathered pace, while concerns over euro zone debt hurt the euro. The dollar rose by 0.7 per cent against a basket of currencies.

US stocks have risen for five straight weeks and surpassed levels not seen since before the Lehman Brothers bankruptcy. The rally has been helped by Republican gains in the US midterm elections and the Federal Reserve‘s plans to buy $600bn of government debt in a bid to reinvigorate a sluggish economic recovery.

The Chief Market Strategist at the ConvergEx Group in New York, Mr. Nicholas Colas, said the stronger dollar was weighing on equities after their recent strong run but added that the underlying trend was still upward.

”We are still in an environment where the market is in an up trend,” he said. ”It‘s the quantitative easing, it‘s the hope for some continued better economic numbers like what we had from the Friday jobs report.”

Source: Punch