STOCKS SELL OFF AFTER QUARTER POINT RATE CUT -- DOLLAR INDEX HITS NEW HIGH FOR THE YEAR WHICH PUSHED GOLD LOWER -- A RISING DOLLAR MAKES IT HARDER FOR THE FED TO BOOST INFLATION

STOCKS WEAKEN...Stocks sold off on today's Fed accouncement.  Or, more accurately, during the press conference afterwards based on some confusing responses from Jerome Powell regarding the reasons for today's rate cut, or whether more cuts are coming.   The first three charts show three major stock indexes falling below their 20-day moving averages, and in heavy trading.   That's not too surprising considering that their 14-day RSI lines and MACD lines had already started dropping over the past couple of weeks.  Prices could be headed toward a retest of their April high and/or their 50-day moving averages.  All eleven stock sectors lost ground with the biggest losses in staples, technology, materials, industrials, and cyclicals.   Energy, real estate, utilities, and financials held up a bit better.  Small caps held better than large caps.  They may have gotten help from a stronger dollar.

The 10-Year Treasury yield dropped 4 basis points to 2.02%.  The two-year yield, however, bounced 2 bps to 1.87%.  The flattening of the yield spread between those two maturities may explain why stock traders were disappointed by the rate cut.  One major side effect of the Fed move was a stronger dollar which is starting to attract a lot of attention.

DOLLAR INDEX HITS NEW HIGH...GOLD WEAKENS...The most dramatic move of the day came from a new high in the dollar.  The daily bars in Chart 4 show the Invesco US Dollar Index (UUP) surging to a new high for the year.  While it rose against all major foreign currencies, its biggest gain came against the euro which fell to a new low.  The rising dollar caused profit-taking in most commodities, and gold in particular (see Chart 5).  There are a number of reasons why the Fed (and the White House) don't want to see a stronger dollar.  One of them is that a stronger greenback lowers inflation in the states.   One of the reasons the Fed gave for lowering its rate today is to boost inflation.  A rising dollar makes that job a lot harder.