The following is an excerpt from Caroline Valetkevitch | January 7, 2012 | Reuters | Finance.yahoo.com |
NEW YORK (Reuters) – Stocks have strayed from their recent link to euro moves, and the start of U.S. corporate earnings next week could help shift investor focus back to U.S. fundamentals from Europe.
Stocks have traded in line with the euro over the autumn, with both experiencing sharp swings on headlines from the euro zone.
That trend may be changing, and it comes just as investors get their first glimpse at fourth-quarter U.S. earnings.
Aluminum company Alcoa (NYSE:AA – News) is expected to report Monday after the closing bell, unofficially starting the reporting period for U.S. corporations. JPMorgan Chase (NYSE:JPM – News) is due to report on Friday, but the bulk of Standard & Poor’s 500 (SNP:^GSPC – News) earnings will come in the weeks ahead.
“I think this month we’re probably going to break away and see the pattern of U.S. market trade on U.S. fundamentals rather than in reaction to the euro movement,” said Fred Dickson, chief market strategist, D.A. Davidson & Co. in Lake Oswego, Oregon.
“I think we’re in a time-out period for that (dollar) carry trade, and it will stay a time out for a while.”
The correlation between S&P 500 E-mini futures and the euro, which moved in near lockstep in the fall, has receded. A 22-day moving average of the correlation shows almost no relation between the movements of the two assets.
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