Stock market drops as dollar strengthens
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Tuesday, December 8, 2009; 6:06 PM
NEW YORK -- Investors sought safety Tuesday as concerns about spiraling debt loads and disappointing corporate reports tarnished hopes for an economic recovery.
Traders turned away from stocks and put money into safe-haven assets like the dollar and Treasurys. Most major stock indexes fell 1 percent, including the Dow Jones industrial average, which lost 104 points but ended off the day's lows.
An earnings forecast from 3M Co. and a sales report from McDonald's Corp. disappointed investors. The reports weighed on the Dow and overshadowed an increased profit forecast from FedEx Corp., whose results are seen as a gauge for the health of the economy.
Questions about debt levels in places from Greece to the Middle Eastern city-state of Dubai added to investors' concerns. Meanwhile, reports in Britain and Germany signaled that manufacturing remains weak.
The unease drove the dollar and Treasury prices higher. The advancing dollar hit commodities prices, which, in turn, hurt energy and materials producers. A stronger dollar makes commodities more expensive for buyers overseas.
After the jump 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 20.9 percent so far in 2009, many investors are looking to protect their gains.
The Dow ended down 104.14, or 1 percent, at 10,285.97 after being down as much as 140 points. It was the biggest point and percentage loss for the Dow since Nov. 27 and erased its gain for December. Only Verizon Communications Inc. rose among the 30 stocks that make up the index.
The broader S&P 500 index fell 11.31, or 1 percent, to 1,091.94, while the Nasdaq composite index fell 16.62, or 0.8 percent, to 2,172.99.
Stocks finished little changed on Monday after reassurance from Federal Reserve Chairman Ben Bernanke that interest rates will remain low to support a recovery failed to galvanize investors.
