Stocks sagged today as a weakening dollar pushed bonds lower and gave investors another reason to sell ahead of next week's expected interest rate increase.
The Dow Jones industrial average finished 27.54 points lower, at 10,963.84, after having dropped as much as 118 points in earlier trading. The blue-chip indicator fell 125.70 points on Wednesday.
The Standard & Poor's 500-stock index fell 9.25, to 1323.59, and the Nasdaq composite dropped 36.30, to 2621.43.
A government report that the U.S. trade deficit was wider than expected in June undercut the slumping dollar, which fell to its lowest level against the Japanese yen since January. The $24.6 billion deficit was 16 percent larger than the shortfall in May.
The dollar fell against the Japanese yen and the euro. In late New York trading, a dollar bought 111.60 yen, down from 111.83 late Wednesday, and a euro bought $1.0644, up from $1.0520. A weaker dollar increases the costs of imported goods, adding to inflation, and it can hurt stocks because it makes U.S. securities less appealing to foreign investors.
Worries about next Tuesday's Federal Reserve meeting on interest rates, the trade report and its effect on the dollar made traders pessimistic.
"It's a 'pick something to worry about' kind of day, and today it's the weak dollar," said Arthur Hogan, chief market analyst at Jeffries & Co. Hogan said concerns about inflation and interest rates will ease after the Fed meeting, when the central bank is widely expected to raise interest rates a quarter percentage point.
Investors then will turn their attention to whether the Federal Reserve will leave rates alone for the rest of the year. Supporting that notion are several recent government reports that show inflation remains under control.
Today's trade news also put pressure on bonds, lifting the yield on the benchmark 30-year Treasury to 6.03 percent from 6 percent late Wednesday. Its price fell $4.06 1/4 per $1,000 in face value.
Alcoa, down 1-11/16 to 65-3/16, helped push the Dow industrials lower after the aluminum company reached an agreement to buy rival Reynolds Metals for $4.34 billion in stock. Reynolds fell 2-11/16, to 65-9/16.
Technology stocks, which are sensitive to interest rate fluctuations because of their high valuations, were hardest hit today.
Internet search engine Yahoo slipped 5 7/8, to 139-3/16; online bookseller Amazon.com dropped 7, to 106 1/8; and online auctioneer eBay fell 12-3/16, to 113 3/4.