By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

Fed nervousness pushes dollar to multiyear highs against rivals

NEW YORK (MarketWatch) -- U.S. stocks fell sharply on Tuesday with main indexes declining more than 1% shortly after the opening bell.

Sparking the downdraft is a strengthening dollar, a selloff overseas and the recognition by investors that the Federal Reserve will begin raising interest rates this year, diverging from other central banks around the globe.

The S&P 500 (SPX) was facing a broad-based rout, with nearly all 10 main sectors trading in the red. The Dow Jones Industrial Average (DJI) at session lows dropped more than 200 points, with all but two of its 30 blue-chip components trading in negative territory.

The Nasdaq Composite (RIXF) also dropped sharply on the 15th anniversary of reaching an all-time high.

The surging dollar hurt commodities, while investors piled into Treasurys, sending yields on the 10-year note down 7 basis points to 2.12%.

On the other side of the Atlantic, the quantitative easing measures launched on Monday by the European Central Bank have pushed European sovereign bond yields down.

"Concerns about what the start of Fed rate hiking could do to risk sentiment, to volatility and to demand for EM and higher-yielding assets won't go away on their own," said Kit Juckes, global macro strategist at Société Générale in a note.

Read: The S&P 500 can't fight the market's selloff forever (http://www.marketwatch.com/story/sp-500-cant-fight-the-markets-selloff-forever-2015-03-09)

(http://www.marketwatch.com/story/sp-500-cant-fight-the-markets-selloff-forever-2015-03-09)Dollar is king: The dollar surged against the euro (EURUSD) and the Japanese yen (USDJPY) as investors increasingly took stock of diverging monetary and economic conditions across the U.S., Europe and Japan.

Outgoing Dallas Fed President Richard Fisher said Monday (http://blogs.wsj.com/economics/2015/03/09/feds-fisher-says-raising-rates-soon-will-allow-for-more-gradual-path/)that robust gains in the job market could begin generating price pressures and prompt action on rates should be taken sooner rather than later.

Also read: Unemployment rate may soon start with a '3' (http://www.marketwatch.com/story/unemployment-rate-may-soon-start-with-a-3-2015-03-09)

Sticking to equities: Analysts at J.P. Morgan said they remain constructive on U.S. equities, which they note look expensive relative to history and similar to late-cycle levels, but aren't so on a country-relative basis.

"The U.S. trades at a 2.4 times premium on price/earnings (next 12 months) basis relative to its 10-year history, whereas the U.K. and eurozone trade at 4.5 times and 3.8 times, respectively. Further, equities still look attractive on a cross-asset basis, given the current yield environment and few attractive investment alternatives," said the team of strategists led by Dubravko Lakos-Bujas.

Read: This 6-year-old bull market's big winners: biotech, pharma and value stocks (http://www.marketwatch.com/story/this-6-year-old-bull-markets-big-winners-biotech-pharma-and-value-stocks-2015-03-09)

Stocks to watch: Shares of Apple Inc.(AAPL) could stay in focus for investors a day after the company revealed its new wearable Apple Watch (http://www.marketwatch.com/story/apple-shows-off-new-smartwatch-macbook-2015-03-09). Shares were down about 0.8% in premarket trading.

Also read: Apple Watch may teach us new bad habits (http://www.marketwatch.com/story/apple-watch-may-be-a-social-disruptor-2015-03-10)

Barnes & Noble Inc. (BKS) will release results ahead of the market's open, while VeriFone Systems Inc.(PAY) will report after the close.

Urban Outfitters Inc.(URBN) rose 6.5% in premarket after earnings topped analysts forecasts late Monday.

Qualcomm Inc.(QCOM) announced a $15 billion share buyback plan and lifted its quarterly dividend to 48 cents a share from 42 cents, effective March 25. Shares rose 2.3% in premarket.

Other markets: The Nikkei 225 index (http://www.marketwatch.com/story/chinese-stocks-retreat-after-data-fuel-deflation-fears-2015-03-10) finished 0.7% lower (http://www.marketwatch.com/story/chinese-stocks-retreat-after-data-fuel-deflation-fears-2015-03-10), despite a weaker yen, which in the past has proved a boost for stocks and exporters. Stocks fell amid reports that the Basel Committee on Banking Supervision may ask banks to raise capital. Chinese stocks fell after data showed China's wholesale deflation worsened in February.

European stocks fell into the red, as Greece debt talks between Athens and its international creditors will resume on Wednesday.

Oil prices (http://www.marketwatch.com/story/oil-prices-hanging-on-fresh-supply-data-2015-03-10)(CLJ5) pulled back as investors awaited fresh supply data. The U.S. Energy Information Administration's monthly report is due later Tuesday. Gold prices (GCJ5) reversed earlier losses and were flat at $1,167.3 an ounce.

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