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Stocks fall as dollar gains, FedEx disappoints
Source: Agencies |
December 18, 2009, Friday
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A RISING dollar and disappointing corporate news pushed stocks lower and Treasurys higher yesterday over concerns that the economy will struggle to recover.
Major stock indexes slid 1 percent, including the Dow Jones industrial average, which fell 133 points.
The dollar jumped to a three-month high against the euro, a sign of risk-aversion in the market. Investor confidence was further sapped as a forecast from FedEx Corp. fell short of expectations and Citigroup Inc. sold stock at a steep discount as part of a plan to repay government loans.
More poor news came in on the economy as the government reported an unexpected rise in unemployment claims last week. The number of new jobless claims rose to 480,000 last week, up 7,000 from the previous week.
Stocks were coming under pressure from the stronger dollar, which can cut into profits of U.S. companies that do business abroad. The euro slumped after Standard & Poor's lowered its debt rating on Greece, the latest European country to have credit problems.
A pair of improved economic reports did little to shore up the market. The Conference Board's index of leading economic indicators rose in November for the eighth consecutive month, while the Philadelphia Federal Reserve said manufacturing in its region rose.
John Merrill, chief investment officer of Tanglewood Wealth Management in Houston, said the rising dollar was overshadowing the improvement in the leading indicators numbers. He said the dollar was benefiting as traders concerned about rising debt levels in countries like Greece pulled out of the euro.
"There are a lot of shifting sands as people, not just federal reserve banks, look at the underpinnings of those currencies," he said.
The Dow fell 132.86, or 1.3 percent, to 10,308.26. The broader Standard & Poor's 500 index fell 13.10, or 1.2 percent, to 1,096.08, and the Nasdaq composite index fell 26.89, or 1.2 percent, to 2,180.05.
Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.48 percent from 3.60 percent late Wednesday.
The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, rose 1 percent.
Gold fell, while crude oil dropped 1 cent to settle at US$72.65 per barrel on the New York Mercantile Exchange.
In corporate news, Citigroup fell 25 cents, or 7.3 percent, to US$3.20 after the Treasury Department backed out of its plans to sell its 34 percent stake in the company.
The move came after investors responded tepidly to a massive stock offer by the New York-based bank, which is trying to repay US$20 billion of the US$45 billion in government support it received to weather the financial crisis.
Meanwhile, FedEx provided a cautious forecast for its fiscal third quarter after reporting second-quarter results fell 30 percent from a year earlier. The shipping company fell US$5.48, or 6.1 percent, to US$84.47.
Credit card lender Discover Financial Services fell US$1.50, or 9.1 percent, to US$14.92 after reporting that its fiscal fourth-quarter profit fell 19 percent because of bad loans.
The concerns about debt in Europe and the corporate news brought reminders that the economy isn't likely to spring back to life the way it did after downturns earlier in the decade.
"The recovery is likely to be muted," said Jim Baird, partner and chief investment strategist at Plante Moran Financial Advisors. "It's likely to be held back by a consumer that remains in a more delicate spot than would ideally be the case coming out of a recession."
Baird added that the market's retreat wasn't worrisome because of the run stocks have been on since March. The benchmark S&P 500 index is up 22.8 percent for the year so some selling is to be expected as investors look to lock in profits for the year.
About three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.7 billion shares compared with 1.2 billion Wednesday.
The Russell 2000 index of smaller companies fell 6.96, or 1.1 percent, to 604.25.
Major stock indexes slid 1 percent, including the Dow Jones industrial average, which fell 133 points.
The dollar jumped to a three-month high against the euro, a sign of risk-aversion in the market. Investor confidence was further sapped as a forecast from FedEx Corp. fell short of expectations and Citigroup Inc. sold stock at a steep discount as part of a plan to repay government loans.
More poor news came in on the economy as the government reported an unexpected rise in unemployment claims last week. The number of new jobless claims rose to 480,000 last week, up 7,000 from the previous week.
Stocks were coming under pressure from the stronger dollar, which can cut into profits of U.S. companies that do business abroad. The euro slumped after Standard & Poor's lowered its debt rating on Greece, the latest European country to have credit problems.
A pair of improved economic reports did little to shore up the market. The Conference Board's index of leading economic indicators rose in November for the eighth consecutive month, while the Philadelphia Federal Reserve said manufacturing in its region rose.
John Merrill, chief investment officer of Tanglewood Wealth Management in Houston, said the rising dollar was overshadowing the improvement in the leading indicators numbers. He said the dollar was benefiting as traders concerned about rising debt levels in countries like Greece pulled out of the euro.
"There are a lot of shifting sands as people, not just federal reserve banks, look at the underpinnings of those currencies," he said.
The Dow fell 132.86, or 1.3 percent, to 10,308.26. The broader Standard & Poor's 500 index fell 13.10, or 1.2 percent, to 1,096.08, and the Nasdaq composite index fell 26.89, or 1.2 percent, to 2,180.05.
Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.48 percent from 3.60 percent late Wednesday.
The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, rose 1 percent.
Gold fell, while crude oil dropped 1 cent to settle at US$72.65 per barrel on the New York Mercantile Exchange.
In corporate news, Citigroup fell 25 cents, or 7.3 percent, to US$3.20 after the Treasury Department backed out of its plans to sell its 34 percent stake in the company.
The move came after investors responded tepidly to a massive stock offer by the New York-based bank, which is trying to repay US$20 billion of the US$45 billion in government support it received to weather the financial crisis.
Meanwhile, FedEx provided a cautious forecast for its fiscal third quarter after reporting second-quarter results fell 30 percent from a year earlier. The shipping company fell US$5.48, or 6.1 percent, to US$84.47.
Credit card lender Discover Financial Services fell US$1.50, or 9.1 percent, to US$14.92 after reporting that its fiscal fourth-quarter profit fell 19 percent because of bad loans.
The concerns about debt in Europe and the corporate news brought reminders that the economy isn't likely to spring back to life the way it did after downturns earlier in the decade.
"The recovery is likely to be muted," said Jim Baird, partner and chief investment strategist at Plante Moran Financial Advisors. "It's likely to be held back by a consumer that remains in a more delicate spot than would ideally be the case coming out of a recession."
Baird added that the market's retreat wasn't worrisome because of the run stocks have been on since March. The benchmark S&P 500 index is up 22.8 percent for the year so some selling is to be expected as investors look to lock in profits for the year.
About three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.7 billion shares compared with 1.2 billion Wednesday.
The Russell 2000 index of smaller companies fell 6.96, or 1.1 percent, to 604.25.
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