Most stocks lost ground Monday as a stronger dollar pushed down commodity prices and investors grew jittery about the market’s six-month rally.
NEW YORK (AP) — Most stocks lost ground Monday as a stronger dollar pushed down commodity prices and investors grew jittery about the market’s six-month rally.
The stronger dollar set off a slide in commodities like oil and gold, which weighed on energy and material shares.
The Dow Jones industrial average ended with a loss of 41 points after being down 94 in morning trading. For weeks, investors looking to take part in the market’s rally have been pouncing on any dips.
Gains in health stocks helped support the market, and Dell Inc.’s plans to buy information-technology company Perot Systems Corp. for $3.9 billion drove some buying in tech stocks.
Analysts have been calling for a retreat in the market after stocks surged powerfully off of 12-year lows in early March, lifting the benchmark Standard & Poor’s 500 index 57.4 percent.
“This is what should happen, needs to happen, is going to happen along the way but it doesn’t mean we’re headed down significantly from here,” said Jordan Smyth, managing director at Edgemoor Investment Advisors in Bethesda, Md.
Meanwhile, the market had a mixed reaction to a private research group’s forecast of economic activity, which came in just below analysts forecasts but still posted a fifth consecutive month of increases.
The Conference Board said its index of leading economic indicators increased 0.6 percent in August, just shy of the 0.7 percent increase economists expected, but still enough of a positive indicator to reinforce Federal Reserve Chairman Ben Bernanke’s pronouncement last week that the U.S. recession was “likely over” from a technical standpoint, even as difficulties such as unemployment remain.
The Dow fell 41.34, or 0.4 percent, to 9,778.86. It has fallen in two of the last three days.
The S&P 500 index fell 3.64, or 0.3 percent, to 1,064.66, while the tech-heavy Nasdaq composite index rose 5.18, or 0.2 percent, to 2,138.04.
The dollar rose against other major currencies, sending prices for gold, oil and other commodities tumbling. Commodities are priced in dollars, so a stronger greenback makes them less appealing for foreign investors.
Oil dropped $2.33 to settle at $69.71 a barrel on the New York Mercantile Exchange, driving energy stocks lower. Sunoco Inc. lost 65 cents, or 2.3 percent, to $27.79.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.49 percent from 3.46 percent late Friday.
Trading reflected a shift out of risky assets that have benefited from the stock market’s advance and into safer plays like the dollar and government bonds. Investors are taking some money off the table ahead of key government meetings this week, including the Federal Reserve’s two-day rate-setting meeting that begins Tuesday.
As long as there are no unwelcome surprises, analysts expect the market to continue to move higher.
“Right now there is not a whole lot to change the overall direction of the market, except for some profit-taking,” said Dan Cook, senior market analyst at IG Markets Inc. in Chicago.
The Fed this week is widely expected to keep interest rates at a record low of near zero, but investors will be looking for any indication of when the Fed plans to actually raise rates, a tactic it would use to ward off inflation.
The Fed has kept interest rates low to help stimulate the economy, but if the central bank signals inflation is becoming a concern, that could spook investors. Until now, the Fed has insisted that inflation, which would further erode the value of the dollar and eat into Treasury yields, is largely in check.
On Thursday, President Barack Obama will host the Group of 20 economic summit in Pittsburgh. Analysts say investors are waiting for more clarity following the meetings before they make more bets on the market.
Shares of Perot Systems shot up 65 percent, or $11.65, to $29.56 after Dell offered to buy the company for $30 a share in cash – a 68 percent premium over the stock’s Friday closing price. Dell slid 68 cents, or 4.1 percent, to $16.01.
Two stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 4.7 billion shares compared with 6.1 billion Friday when trading was heavy because of the expiration of options contracts.
The Russell 2000 index of smaller companies fell 1.91, or 0.3 percent, to 615.97.
Overseas, Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index dropped 0.6 percent, and France’s CAC-40 fell 0.4 percent. A number of other Asian markets, including Japan’s, were closed for holidays.