Stocks Start Lower Monday, as Dollar Rises
November 08, 2010NEW YORK (AP) — Stocks pulled back Monday as the dollar rose and traders eased back from a rally that brought indexes to their highest levels since the peak of the financial crisis in September 2008.
The Dow Jones industrial average fell 62.03, or 0.5 percent, to 11,382.05 in late morning trading. It had surged 2.9 percent last week after the Federal Reserved announced a $600 billion stimulus package for the U.S. economy.
The Standard and Poor's 500 index fell 5.97, or 0.5 percent, to 1,219.88. The Nasdaq composite index slid 0.73, or 0.1 percent, to 2,578.25.
Technology companies were the only group among the 10 industry areas of the S&P 500 index to post gains. Financial companies were down the most, at 1.3 percent.
"Today is shaping up to be a modest sell-off and that's to be expected," said Barnaby Levin, a managing director at HighTower Advisors.
Stocks have risen in recent weeks on better-than-expected corporate earnings reports and the introduction of a bond-buying program by the Federal Reserve that is intended to stimulate the economy by driving interest rates lower and encouraging spending.
The dollar rose 0.7 percent against a broad basket of currencies. That's a negative for big U.S. companies like Caterpillar Inc. that do a lot of business overseas, since a higher dollar makes their products more expensive in other countries. Caterpillar was off 1.1 percent, and Boeing Co., another big exporter, was off 1.9 percent, making it the biggest loser among the 30 companies that make up the Dow.
The euro fell 1.1 percent from recent highs, in part on renewed concerns about the debt burdens of the weaker economies among countries that use the Euro. Ireland announced Thursday that it would raise taxes and seek additional cuts in government services to rein in its deficit. Yields on 10-year Irish bonds rose sharply in response. U.S. markets had swooned this spring over concerns that a fiscal crisis in Greece would spread to Portugal, Spain and other weak economies in the euro zone.
Prices for Treasury bonds rose. The yield on the 10-year Treasury bond fell slightly to 2.52 percent, from 2.53 percent late Friday.
Traders will get a better indication of consumer spending later in the week as several major retailers announce earnings. Kohl's Corp., Macy's Inc. and J.C. Penny Co. Inc. will release their third-quarter earnings starting Wednesday. Retailers such as The Gap Inc. and Macy's rose more than 8 percent last week on better-than-expected October sales that suggest that consumers will increase their spending this holiday season.
Leaders from the Group of 20 industrialized and developing nations will meet Thursday and Friday in Seoul. Tensions have risen between the group regarding trade imbalances and the respective strength of the Chinese yuan and the dollar.
Officials from several countries have criticized the Fed's bond-buying program amid concerns that it will spark asset bubbles in emerging economies. Representatives in Germany, Brazil, South Africa and China have voiced objections to the plan and argued that it could lead to a surge in commodity prices.