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Stock market indices fall on dollar gain

09 December 2009 07:40 (UTC +04:00)

Baku- APA-Economics. Investors dumped stocks and sought safe-haven assets like the dollar and Treasurys on signs that the global economy is still struggling, AP reported.
The Dow Jones industrial average lost 80 points at midday but was off its lows.
A disappointing earnings forecast from Dow Jones industrials component 3M Co. and a weak sales report from McDonald’s Corp., another Dow company, pulled stocks lower. The reports overshadowed an increased profit forecast from FedEx Corp.
Reports in Britain and Germany signaled that manufacturing remains weak, while Japan’s government approved $81 billion in stimulus measures to keep its economy out of recession. Meanwhile, a leading credit rating agency has cut its ratings on six Dubai state-linked companies due to worries about their growing debts.
Investors sent the dollar and Treasury prices higher in response to the day’s news. Commodities fell as the dollar rose. A stronger dollar makes commodities more expensive for buyers overseas, and hurts profits at companies that have large international operations.
After the massive rally in stocks and commodities this year, investors are looking for clues about where the economy is headed and how best to position their portfolios for next year. Investors are uncertain of how long the environment of low interest rates and a weak dollar that helped fuel the market’s rally will last.
Philip S. Dow, managing director of equity strategy at RBC Wealth Management in Minneapolis, said 3M’s forecast drew attention from FedEx and that the day’s retreat is in order after the steep gains in stocks over all.
"People were so enthused with FedEx then got a little disappointed with 3M," he said. "I just think it’s a rest."
At the same time, there are still plenty of doubts about the economic recovery to drive cautious investors to pad their portfolios with safe havens. With the Standard & Poor’s 500 index up 63.1 percent since early March, many investors are looking to protect their gains.
Stocks came off their lows of the day as President Barack Obama proposed spending on infrastructure projects as well as increased tax cuts for small businesses.
The speech comes after the government’s unemployment report Friday showed far fewer job losses in November than expected. However investors still have doubts about how strong a recovery will be with one in 10 Americans out of work.
In midday trading, the Dow fell 79.51, or 0.8 percent, to 10,310.60. The Dow fell as much as 140 points earlier.
The broader Standard & Poor’s 500 index fell 7.38, or 0.7 percent, to 1,095.87, while the Nasdaq composite index fell 4.88, or 0.2 percent, to 2,184.73.
Stocks finished little changed on Monday after reassurance from Fed Chairman Ben Bernanke that interest rates will remain low to support a recovery failed to galvanize investors.
Shares of 3M fell after the consumer products maker predicted adjusted earnings of $4.50 to $4.55 per share for the full year. That’s below a profit of $4.57 per share forecast by analysts. The stock fell 80 cents, or 1 percent, to $77.11.
McDonald’s fell $1.24, or 2 percent, to $60.69 after the world’s largest fast-food chain said monthly sales in the U.S. fell in November.
FedEx raised its earnings forecast for the November quarter late Monday. Shares of the package delivery company rose $2.86, or 3.3 percent, to $90.38. Investors watch FedEx because the volume of its business is seen as an indicator of the overall strength of the economy.
Beyond the corporate news, analysts said the rising dollar dominated trading.
Peter Cardillo, chief market economist at the brokerage Avalon Partners Inc. in New York, predicts the dollar will resume its slide and remove pressure from stocks.
"This is a short-term correction in the dollar and the same with the other markets and I don’t think it’s going to be long-lasting," he said.
Bond prices rose, sending yields lower. The yield on the benchmark 10-year Treasury note fell to 3.39 percent from 3.43 percent late Monday.
The ICE Futures US dollar index, which tracks the dollar against other major currencies, rose 0.4 percent.
Gold prices fell for a third straight day.
Crude oil fell $1.04 to $72.89 per barrel on the New York Mercantile Exchange.
Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 472.3 million shares compared with 394.6 million shares traded at the same point Monday.
The Russell 2000 index of smaller companies fell 1.82, or 0.3 percent, to 601.74.
Overseas, Japan’s Nikkei stock average fell 0.3 percent. Britain’s FTSE 100 fell 1.7 percent, Germany’s DAX index slid 1.7 percent, and France’s CAC-40 fell 1.4 percent.