By Kristina Peterson
U.S. stocks dropped Friday, as a weaker euro piled on to fears
of a cooling U.S. economy and energy stocks sank as the dollar
jumped.
The Dow Jones Industrial Average (DJI) fell 113 points early
afternoon trade. The measure is now firmly in the red for the week,
as disappointing jobs and manufacturing data wiped out gains from
excitement over a resurgence in global merger activity.
Friday's slide in the euro reminded investors of lingering
sovereign debt concerns and added to the week's push-and-pull
between encouraging corporate news and persistent reminders of the
struggling global economic recovery. Light trading in August has
kept the market bouncing in a narrow range.
"The market, being range-bound, is at the mercy of whoever last
spoke and the most recent number. It is very frenetic in its
reaction to news," said Liz Ann Sonders, chief investment
strategist at Charles Schwab. Providing the most recent, if
limited, lift has been the jump in deal activity, which this week
rose to its highest levels since late 2009.
"It probably unleashes some values and shows that companies see
opportunities to grow their business and are not in lockdown mode,
but I don't think it's necessarily the elixir for the overall
economy or the market as a whole," Sonders said.
The Dow fell 1.1% to 10,159. Among the measure's worst
performers, manufacturing giant 3M (MMM) shed 1.9%, Caterpillar
(CAT) fell 2.2% and General Electric (GE) dropped 1.8%.
The Nasdaq Composite (RIXF) shed 0.8% to 2,162. The Standard
& Poor's 500-share index (SPX) dropped 1% to 1,065.
Energy stocks led Friday's decline as crude-oil prices recently
fell below $74 a barrel. Sterne Agee & Leach cut its
stock-investment ratings on land drillers to "neutral" from "buy,"
citing rising service costs, among other factors. Nabors Industries
fell 4.1%, while Patterson-UTI Energy (PTEN) fell 5.3% and
Helmerich & Payne (HP) slid 4.4%.
Multinational companies with overseas operations also slid as
the euro weakened. The common currency fell after a European
Central Bank official suggested monetary policy should remain loose
until next year.
The euro fell to a one-month low against the dollar after
Deutsche Bundesbank President Axel Weber said the speed of the
European Central Bank's withdrawal from its anti-crisis measures
will depend on the health of the euro area's banks, in an interview
with Bloomberg TV on Friday.
Weber's comments suggest that even hawks on the ECB's governing
council are still more concerned about the fragility of the euro
area's banks than they are about inflation.
"We've had this very substantial divergence between company
reports and what the macro data are saying over the course of the
past month," said Keith Hembre, chief economist and chief
investment strategist at First American Funds of Minneapolis. "The
data just point to very little in the way of growth here in the
third quarter."
The euro was recently trading at $1.2668, down from $1.2819 late
Thursday in New York. The U.S. Dollar Index (DXY), which tracks the
currency against a basket of six others, jumped 1%. Demand for
safe-haven Treasurys rose, pushing yield on the 10-year note
(UST10Y) down to 2.56%. The two-year note's yield hit a record low
of 0.455% overnight, but edged up slightly in recent trading to
0.49%.
Among stocks in focus, Hewlett-Packard (HPQ) dropped 3.2%, even
as its profit climbed 6.1% on higher world-wide sales in its fiscal
third-quarter, the technology giant's final quarter with Mark Hurd
at its helm. But investors have been skittish about H-P since Hurd
left the company two weeks ago, during which the stock has lost
about 12% of its value.