The dollar headache is about to get worse for investors

While you were sleeping, China’s stocks went charging back into bull-market territory.

It should be noted that yesterday’s 4.3% gain on a five-month-old reportabout a trading link between Shenzhen and Hong Kong contributed to the bull’s return. The market closed Thursday up some 20.3% from the summer Aug. 26 bottom. All good, right?

The stability provided by China (of all places) is not a bad thing for stock markets overall, says Craig Erlam, senior market analyst at Oanda. This time, the China gains have been largely gradual (well, if you discount that misinformation run yesterday), and there seem few signs of the investor herd mentality that burst the bubble last time, by piling into, then piling out of, stocks.

And if the Fed can strike China off its worry list, for now, it maybe can get on with its rate-rise show. Of course, says Erlam, there’s a chance that the herd comes back to China and overinflates the market again. “If it rallies and then collapses again before the meeting, it may discourage some policy makers, which could swing the vote if it’s very close,” he says.

But China has some competition for investor attention right now — “King Dollar.” The buck pulled back a little overnight after a sprint higher yesterday, but it’s moving up again ahead of New York’s open.

That overnight pause for the dollar came amid some concerns that if buck rises too sharply, the Fed, knowing the economic implications, may not be so eager to raise rates. As our call of the day points out, the economy and the stock market have a big problem — and George Washington’s face is all over it.

Key market gauges

 and S&P
 futures are moving up, while the Shanghai Composite
 is back in bull market territory. Crude
is up a little after a stockpile buildup triggered a selloff. European stocks
 are pushing up and the Bank of England voted to keep interest rates unchanged. Gold
 is flat, while the dollar
is at a 3-month high. No change in U.K. rates has pushed the dollar higher against the pound

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The call

Dollar headaches are getting a lot of mentions this morning. First up, The Real Fly at iBankCoin. He says if Friday’s jobs data lands above the 180,000 level that many expect, then “things get dicey” for stocks, as the market starts pricing in a rate hike for December. That will send the dollar up and energy stocks down, as crude likely will take a hit. Of course, some bank stocks would enjoy a rate hike.

“King Dollar,” as he calls it, is “up almost 20% over the past two years and it’s killing our exporters, making them less competitive and hurting earnings.”

Over at the Wolf Street blog, Wolf Richter agrees that the market has a big dollar problem, but says the greenback could be in for a hard knock by 2016.

He refers to a NBF Economics and Strategy note from economists Stéfane Marion and Krishen Rangasamy, who note how dollar strength is hitting the U.S. economy harder than anyone thought. It’s restraining growth, as exports get hit and causing import prices to fall, which is “deadly for over-indebted Corporate America,” says Richter.

Speculators have been backing off long dollar positions, which have gone out of vogue amid doubt on the Fed’s ability to raise rates this year. But that may only cause the Fed to go ahead and hike in December, says Richter. He cites the NBF economists, who say the U.S. central bank has a credibility problem it’s likely to try to fix by putting its foot down in time for Christmas.

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Naturally, the dollar will gain on any hike and that will create some more headwinds for the economy next year, hitting consumption, the housing market, even employment creation. The only good news? All this bad news created by one hike and a strong dollar will keep that “upcoming tightening cycle brief,” say the NBF economists. Could be chaos meanwhile, though. Read Richter’s full post here.


 is up 4% posting an 11% bump in earnings. Costs went up, but so did its user base. Here are the eight biggest takeaways from those results.

Whole Foods
 is down 6% as same-store sales fell and shares got thrashed in late trading.

 shares are off 16%. Last night the cybersecurity company said bookings missed expectations. So is the whole red-hot security sector in trouble, or is it just FireEye?

Before the bell this morning, Kate Spade
and SeaWorld
Molson Coors
 have all reported. After the close, it’ll be Shake Shack
Kraft Heinz
 and Disney
Check out MarketWatch’s Earnings Wall for more previews and results.

The buzz

 is looking to counter Airbnb via a $3.9 billion acquisition of HomeAway

What’s up with Under Armour’s
 Star Wars-themed line? It seems “Alter Ego: The Imperial Collection” is for men only.

No more fish-bladder in Guinness beer.

The quote

“I don’t like what he did, and I think it hurt the president having his iron-ass view of everything …There’s a lack of humility, a lack of seeing what the other guy thinks.” — That’s former President George Bush on Defense Secretary Donald H. Rumsfield. The elder Bush opened up about top officials in his son’s presidency in a biography to be published next week. He also talked about how former Vice President Dick Cheney “had his own empire.”

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The economy

Weekly jobless claims come out today, in the countdown to Friday’s payrolls data at 8:30 a.m. Eastern. Productivity and unit labor costs for the third quarter are hitting at the same time. Read: Economic preview

There’s also a bunch of Fed speakers today. A few worth noting: New York Fed’s William Dudley, a voting member, and Fed Vice Chairman Stanley Fischer at 8:30 a.m. Eastern. Later comes Atlanta Fed President Dennis Lockhart, at 12:45 p.m. Eastern.

The chart

China stocks are back in bull territory. Here’s the Shanghai Composite, from the Aug. 26 bottom of a summer selloff until now. A bull market is defined as a rise of 20% from a recent low.

FacetSet Research

The stat

16% — That’s how much Bill Ackman’s four Pershing Square hedge funds have lost so far this year, after a record 40% rise in 2014. That’s the biggest decline ever for the firm, reports The Wall Street Journal. Of course, Valeant
 hasn’t done Ackman any favors lately.

Random reads

The possibility there was a bomb aboard that crashed Russian jetliner is growing.

When you make a train stop for your selfie.

Foo Fighters get that Italian concert done.

Cow protection at extremes in India as another man dies.

Activists want NBC to un-invite Donald Trump from ‘Saturday Night Live’

Here’s the “Ben-Carson-is-a-loser” promo from that show:

We’ll just close on this high note:

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