adminUS stocks fell, wiping out gains for the year, as the dollar strengthened to near a 12-year high versus the euro amid speculation the Federal Reserve is moving closer to raising interest rates.
Intel Corporation and Cisco Systems Inc lost at least 1.9 percent as technology companies in the Standard & Poor’s 500 Index led declines. United Technologies Corp, Goldman Sachs Group Inc and Home Depot Inc dropped more than 2 percent to pace losses among the biggest companies.
The S&P 500 retreated 1.4 percent to 2,050.93 at 2:15PM in New York, falling below its average price for the past 50 days for the first time since February 9. The Dow Jones Industrial Average lost 272.06 points, or 1.5 percent, to 17,723.66 with all 30 components declining. The Nasdaq 100 Index tumbled 1.5 percent.
“A continuation of dollar strength and euro destruction is certainly raising some concerns,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc, said in a phone interview.
“I don’t think there was any one specific event or item that caused this, but the fact that it’s a trend that’s been going on for the last several weeks is concerning given the levels we’re at now.”
Concern the Fed may start raising interest rates this year amid a strengthening economy has weighed on equities and helped boost the dollar.
In his last speech as president of the Fed Bank of Dallas, Richard Fisher said the central bank should begin to gradually raise rates before the economy reaches full employment to avoid triggering a recession.
The S&P 500 fell 1.6 percent last week, the most since January, as data showed the jobless rate reached the central bank’s range for what it considers full employment. Policy makers next meet on March 17 to 18.
The Fed stands out among major central banks in accepting a higher exchange rate as a sign of economic strength. Peers from Sydney to Wellington, Tokyo, Zurich and Frankfurt are cutting rates and buying government bonds to stimulate growth and, in the process, sometimes weakening their currencies.
The dollar has rallied this year versus 14 of 16 major currencies, including the yen, pound, euro and Brazilian real.
“The dollar’s going up so much so fast you wonder what it does to US economic growth down the road, to profitability,” Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees $338 billion, said by telephone.
The S&P 500 has entered the seventh year of a bull market, pushing valuations near a five-year high. The index has more than tripled from its bear-market low on March 9, 2009, buoyed by three rounds of Federal Reserve bond-buying and low interest rates.
Tuesday’s drop was broad-based as nine of the S&P 500’s 10 main groups retreated, and four out of five stocks fell. All but three of the 24 developed-nation indexes declined while the MSCI All-Country World Index sank 1.4 percent, the most in two months.
Technology, financial and raw-material companies paced declines in the US, down at least 1.4 percent, with financials falling the most since January.
Apple Inc slid 1.4 percent. The company dropped 0.4 percent yesterday after presenting new products and services at an event in San Francisco, including a smartwatch.
Micron Technology Inc and Intel fell more than 2.4 percent, while hard-disk maker Seagate Technology lost 3.9 percent to its lowest since October. Semi-conductor companies in the S&P 500 have lost 5.6 percent since March 2, and reached their lowest level in a month.
Banks and insurers dropped at least 1.9 percent as the benchmark 10-year Treasury yield retreated the most in two weeks. Wells Fargo & Co slipped 1.9 percent, Citigroup Inc lost 2.3 percent and Berkshire Hathaway Inc fell 1.6 percent. — Bloomberg.
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