A solid gain for the US dollar drove some serious volatility in commodities today as gold and oil bounced around aggressively.
The falling yen pushed up the dollar as the Bank of Japan has endeavored to drive down its own currency to boost its economy.
There may have also been a technical angle at play here as the USD/YEN broke through the widely watched 100 level yesterday, which set off a strong rally for the dollar.
The most immediate impact was in commodities. Crude oil fell as low as $93.37, a 3% decline, before bouncing back above the $95 level. Gold (GLD) saw a similar sharp decline in early trading, and while it finished down, it did at least make a strong move off the lows of the day at $1,418. There was also weakness in silver, natural gas, platinum, and palladium, though curiously, copper was up.
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However, it wasn't necessarily a "risk-off" day.
The Dow Jones Industrial Average (INDEXDJX:.DJI) was up only modestly, but the small-cap Russell 2000 (INDEXRUSSELL:RUT) saw a serious rally , and there were declines in so-called "safe" assets like US Treasuries and German bunds.
So needless to say, without any major global economic news or events to which we can attribute the market action to, it was quite a confusing day.
However, Federal Reserve Chairman Ben Bernanke made some interesting comments at a speech today during the Fed conference in Chicago.
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While there wasn't a great deal of commentary on monetary policy, Bernanke did note that the Fed is watching for signs of excessive risk-taking in the market, including "reaching for yield," which is an interesting statement considering the surges in junk bonds and dividend-paying stocks.
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If you recall, in the past, the Fed historically focused on a dual mandate of price stability and maximum employment. This line of discussion represents an extension of the Fed's increasing emphasis on market activity.
Monday's Financial Outlook
With earnings season winding down, there are no major companies reporting on Monday .
On the economics front, we'll see the April retail sales report at 8:30 a.m. EDT , with the March business inventories report following at 10:00 a.m. EDT.
Elsewhere, investors continue to debate whether we're headed straight for a pullback based on seemingly positive sentiment. However, the sheer quantity of market commentators specifically describing equity investors as complacent seems awfully high (see the Google News grab below), which is unusual for a market top, if that's what we're heading into.
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But then again, there's this: