Michael Reinking, senior market strategist at the New York Stock Exchange, joins J.D. Durkin to discuss the dollar hitting four-year lows, Fed expectations, and what investors are watching as major tech earnings begin.
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\J.D.: Michael Reinking is a good friend of ours here on the show. He is the senior market strategist at the NYSE. Thanks for being here to kick off the broadcast.
Michael: J.D., thanks for having me.
J.D.: I do want to talk about the dollar reaching the lowest level in four years. It fell as low as 96.13. What is that telling you either about investor confidence right now or a lot of other factors we're following?
Michael: So we actually got some comments from President Trump just at the end of the day, which I added to that downside, right? Where he basically alluded to the fact that he didn't think the dollar weakness has been too much. And he actually, in his own Trumpian way, said he didn't mind the dollar going up and down like a yo-yo. That was sort of interesting.
That's something you typically hear kind of in terms of policy. Look, the dollar weakness has kind of been an ongoing theme that we really started to see kind of earlier last year. There were multiple different factors kind of weighing on the dollar. What we're seeing kind of interest rate differentials start to kind of narrow.
We've also seen this idea of kind of this de-dollarization after some of the Washington policy where investors and central banks are looking for non-dollar assets after you saw sanctions and things of that nature. And so it's something that's been kind of ongoing. We did see a little bit of an acceleration to the downside.
After there were some reports last Friday that the Federal Reserve was doing a rate check with banks, suggesting that there could be some intervention, especially as it relates to the Japanese yen. But it is a pretty widespread kind of move for the dollar It's not just the end. It is pretty widespread across currency.
J.D.: You mentioned the central bank. Happy Fed Day Eve to all who celebrate what's trust us is all of us down here at the big board. 2:00pm decision. I think it's pretty baked in at this point, what to expect, but 2:30pm, one of Jerome Powell's last press conferences as chairman of the fed, what are you going to be listening to?
Michael: Yeah. Look, I think at this point, there's not a whole lot of drama as it relates to monetary policy. Markets have pushed out the expectations for the first fed rate cut this year to come kind of in the middle of the year. That's back from kind of early Q1 when we were coming into this year, I think kind of the big topic that the press will push on is the most recent investigation by the DOJ. I don't necessarily think that Chair Powell will kind of really bite on that.
We'll be looking for some more commentary around the balance sheet, which they've started to rebuy treasuries again so that that's something kind of markets will be paying attention to And then the one curveball that you could possibly get on a fed day is we're waiting for President Trump to announce Chair Powell's replacement. That would be kind of interesting if you actually got the announcement tomorrow, maybe 2-2:30. He knows that would be the big curveball, incidentally.
J.D.: Yeah, but Powell is a very disciplined messenger. I don't expect him to take the bait on, inevitably, those questions even about the Lisa Cook dismissal case in front of the Supreme Court. There's a lot of drama outside of the lane of pure monetary policy. As if all of that weren't enough, this time tomorrow, Microsoft, Meta, Tesla, we really kick off the Mag 7 earnings. What are you going to be looking for? Is it CapEx? Is it spending strength? There's so many metrics to point to.
Michael: Yeah. So I think, for every company it's a little bit different. And the setup this quarter is also different than what we've seen for much of the last year, right? Where the one of the indexes that we like to pay close attention to is the NYSE Fang+ index. That index is actually kind of been underperforming. So if you look it topped out in October and it's down about 7% since Halloween. And it just tagged its 200 day moving average last week. So a lot of those stocks have been underperforming. Now they've bounced over the last couple of days which is some of that rotation that we've been seeing. So for the start of the year everybody talked about the broadening. We saw the Russell 2000 outperformed the S&P 500 for 15 consecutive days. The longest streak going back to the mid 1990s. That's reversed as of Friday. We're now seeing kind of those mega-cap tech names coming back into that leadership position for the last couple of days. And then we have the earnings tomorrow night which are going to really set the stage.
J.D.: Absolutely.Okay. The great Michael Reinking, senior market strategist here at the New York Stock Exchange. It is really great to have you. Michael, thanks a lot for being here.
Michael: Thanks for having me.