Dollar Up as Market Drops Nearly 2% (UUP, PFE)

In surprising news, Standard & Poor's warned that it may lower the long-term debt outlook for the US economy, finding that, in their estimation, a divided Congress may lack the ability to properly address the "long-term budgetary challenges by 2013". The rating agency kept the sovereign debt rating at AAA, but announced a one-in-three chance that they will formally downgrade the US debt outlook in the next two years. Stocks took a hit across the board on the news, with the Dow losing more than 200 points so far on the day, down roughly 1.75%. The S&P 500 index is down more than 20 points, or roughly 1.6% off its opening total. One interesting, and somewhat counter-intuitive gainer on the day, has been the US dollar. Look at the PowerShares DB US

Index Bullish Fund

, which mirrors the relationship of the dollar to a few common foreign currencies. As of post time, UUP is up $0.21, almost 1% on the day. So, what's driving the gain in the dollar despite the market tanking? It appears that it might just be the workings of recent trends in the economy. Since 1990, the US dollar has alternated between periods where it was pegged nearly exactly to the success of the stock markets, and other periods where it had an inverse relationship with stocks. The exact mix of events underlying the market changes today are right out of a Dickens novel. Europe has three nations already in fiscal trouble with their overall debt loads and may need to bail out a fourth, Spain, in the coming year. Bizarre weather patterns have driven food prices up and unease in the middle east has driven the price of oil to near-record points. Add to that disaster in Japan, which one month later, still has no solution and may be a hazard for the near- and medium-term future, and it becomes easy to see why Xanax-maker Pfizer

is up on the year.