By Corrie Driebusch And Saumya Vaishampayan
U.S. stocks fell on Friday as the dollar continued to
strengthen, sparking worries about corporate earnings.
The Dow Jones Industrial Average declined 236 points, or 1.3%,
to 17658. The S&P 500 index fell 18 points, or 0.9%, to 2048
and the Nasdaq Composite shed 32 points, or 0.7%, to 4861.
Traders said in recent sessions the strengthening dollar has
been the main driver for stock-market performance.
"The dollar has been one of the biggest surprises in terms of
how it continues to strengthen," said David Lefkowitz, senior
equity strategist at UBS Wealth Management Research.
There is a risk of a stronger dollar crimping U.S. earnings and
slowing down the U.S. economy, he said. Even though he believes it
won't have a big impact on earnings, he said the fear has been
pressuring stocks.
As the dollar gains against foreign currencies, it raises
investor concerns about multinational companies' earnings
potential. A stronger dollar hurts profits overseas, both by
dampening demand as U.S. exports become more expensive and reducing
the value of profits earned in other countries.
On Friday the euro fell 1% to $1.0517, following a slight
rebound on Thursday that coincided with stock-market gains.
Month-to-date the euro is down 5% versus the dollar through
Thursday, and it's off roughly 24% from its high against the dollar
hit last March.
Some traders said the focus on the dollar can be seen in the
better performance of small-cap stocks, which tend to be more
U.S.-focused, compared with their large-cap counterparts. With
Friday's stock-market declines, the Dow industrials and the S&P
500 are in negative territory for the year, while the small-cap
Russell 2000 index, although down 0.7% Friday, is still up 1.9%
year to date.
Action has been choppy in the last week as investors look for
clues on the timing and pace of the Federal Reserve's rate
increases, as well as the implications for stocks. That has
heightened the emphasis on economic data, which the Fed has said it
would closely watch in making its decision.
The Labor Department said Friday producer prices fell 0.5% in
February from January. Economists surveyed by The Wall Street
Journal expected prices would rise 0.3%. The producer-price index
declined 0.6% in February from a year ago.
Also on Friday the University of Michigan's preliminary March
sentiment index declined from a final February reading, suggesting
consumers have scaled back their enthusiasm about the U.S. economy
even as energy costs have remained low. The data followed last
week's robust employment report for February which led to a 1.5%
drop in the Dow, while Thursday's weak retail sales report boosted
the blue-chip index by 1.5%.
"We're running in place," said Jim Dunigan, chief investment
officer at PNC Wealth Management. "I wouldn't suggest the average
investor make decisions on what the Fed is going to do," he said.
The average investor should "make decisions based on is the economy
improving, and is that improving the prospects for companies to
generate profits," he added.
European stocks rose slightly, with both France's CAC 40 and
Germany's DAX rising 0.1%.
In commodity markets, gold futures slipped 0.1% to $1150.80 an
ounce.
Crude-oil futures declined 4% to $45.15 a barrel. The yield on
the 10-year Treasury was down 0.8% at 2.102%. Yields fall as prices
rise.
Ann Inc. posted a surprise profit in its holiday quarter on
stronger-than-expected sales growth, as the company also outlined
an effort to deliver an additional $35 million in cost savings by
2016. Shares of the retailer climbed 7.9%.
Intel Corp. on Thursday cut its revenue outlook for the first
quarter by nearly a billion dollars, a sign that demand for
personal computers is weakening amid sharp currency fluctuations
and other factors. Shares dipped 1.1%.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
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