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%.
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 skidded more than 260 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 its 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 weighed on
European government bond yields.
"When the Federal Reserve hikes rates this year, it will not be
in tandem with other major central banks, quite the opposite.
Launching of QE in Europe has sent the euro to new multiyear lows,
making the dollar even stronger and that also worked as a de facto
tightening," said Kristina Hooper, U.S. investment strategist at
Allianz Global Investors.
"While investors fear the actual tightening, they know
ultimately it is good for the economy. Today's selloff is sparked
by big reactions in German bund yields and foreign-exchange
markets," Hooper said.
The dollar surged against the euro (EURUSD) and the Japanese yen
(USDJPY), sending the dollar index (DXY) up 1% to 98.56.
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: Michael Arone, chief investment strategist
at State Street Global Advisors' U.S. business, wrote that
investors are underestimating the amount of additional global
stimulus and its impact on market returns in the months ahead,
"almost regardless of what the Fed does."
He noted that the Fed's policy is still accommodative. That
combined with new liquidity from other central banks is likely keep
riskier assets such as stocks in high demand.
Analysts at J.P. Morgan said they remain constructive on U.S.
equities, which look expensive relative to history and similar to
late-cycle levels, but aren't so on a country-relative basis.
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) shares fell sharply after
quarterly earnings came in below Wall Street's expectations.
Urban Outfitters Inc.(URBN) jumped 8.4% 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.
Read more in Movers & Shakers column
(http://www.marketwatch.com/story/apple-in-spotlight-after-watch-reveal-barnes-noble-earnings-on-tap-2015-03-10).
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. 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) also fell.
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