The article incorrectly said that Federal Reserve Chairman Ben S. Bernanke would release details of the administration's plans to reform financial regulation. Those plans are expected to be announced today by President Obama.
Dow Dips Back Into the Red
Stocks Lose Ground as Dollar Rises and Commodity Prices Slip
Traders work on the floor of the New York Stock Exchange Wednesday, June 10, 2009. (AP Photo/Richard Drew)
(Richard Drew - AP)
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Tuesday, June 16, 2009
The stock market's three-month rally stumbled yesterday as prices fell for raw materials such as precious metals, soybeans and even pigs.
The major indicators were each down more than 2 percent. The blue-chip Dow Jones industrial average -- which just last week had erased its losses for the year -- fell back into negative territory, closing down 2.1 percent, or 187.13 points, to 8612.13. The broader Standard & Poor's 500-stock index dipped 2.4 percent, or 22.49 points, to 923.72, and the tech-heavy Nasdaq declined 2.3 percent, or 42.42 points, to 1816.38.
The dollar gained against most major currencies yesterday after Russia's finance minister expressed confidence that it would remain the world's reserve currency at a Group of Eight meeting in Italy over the weekend. The dollar has strengthened significantly since hitting a year-to-date low against the euro earlier this month, which was good news for investors concerned about inflation.
But the stronger dollar also resulted in a broad decline in commodities, which are priced in dollars. The UBS Bloomberg constant maturity commodities index fell 27 percent yesterday. Gold futures for August delivery were down 1.4 percent, or $13.20, to $926.90 on the New York Mercantile Exchange. Soybean futures fell 5 percent and lean hogs lost nearly 3 percent. Crude oil prices for July fell 2 percent, or $1.42, to $70.62.
That in turn put pressure on commodity-producing companies in the equity markets, sending them down nearly 4 percent. Freeport-McMoRan, a producer of gold, silver and copper, fell 5.8 percent, or $3.37, to $55.14. Alcoa dropped 6.5 percent, or 78 cents, to $11.21.
But David Chalupnik, head of equities at Minneapolis-based First American Funds, said the day's losses were unlikely to hamper the rally of the past three months, which has sent stocks up more than 30 percent.
"Every time this market wants to pull back, there's a lot of cash sitting on the sidelines and the pullback is very shallow," he said.
U.S. investors' pessimism extended the declines in European and Asian markets. London's FTSE 100 dropped about 2.6 percent, to 4326.01, while Germany's Dax fell 3.5 percent, to 4889.94. In Hong Kong, the Hang Seng index decreased 2 percent, to 18,498.96.
Investors are anticipating a big week of economic news, with the producer price index and data on housing starts scheduled to be released today. Federal Reserve Chairman Ben S. Bernanke is expected to release details of the Obama administration's plans for financial regulation reform tomorrow. And Friday marks so-called quadruple witching, when contracts for several types of stock futures and options expire and investors recalibrate their portfolios, contributing to volatility in the markets.
"The market does not go up every day," said James Cox, managing partner at Harris Financial Group. "If it did, we would all be out of a job."
