Dollar Decline Weighs on Stocks

Updated from 1:16 p.m. EST

Stocks dropped Friday as a steep decline in the dollar brought out sellers in a holiday-shortened session.

The Dow Jones Industrial Average fell 46.78 points, or 0.38%, to 12,280.17, pressured by a 1% fall in component Home Depot (HD Quote). The S&P 500 was off 5.14 points, or 0.37%, to 1400.95, and the Nasdaq Composite was lower by 5.72 points, or 0.23%, to 2460.26.

The day after Thanksgiving is typically one of the lowest-volume trading days of the year, providing increased volatility. About 884 million shares traded on the New York Stock Exchange, compared with a more typical day in which volume tops 1 billion shares. Advancers beating decliners by an 8-to-7 margin.

Trading volume on the Nasdaq was 676 million shares, with falling stocks outpacing out those that rose by a margin of 3 to 2.

Robert Pavlik, chief investment officer with Oaktree Asset Management, is looking to next week's numbers as a broader indicator about the market.

"The rally on Wall Street has been largely based on two important factors: the decline in energy prices and the belief that the U.S. economy will not fall into a recession," says Pavlik. "Next week's numbers will go a long way in determining whether or not the rally will continue into the final month of the year."

Friday's move lower punctuates a week where the Dow fell 62 points, or 0.5%, from its all-time high. On the other hand, the S&P 500 gave back a fraction of a point for the week. The Nasdaq rose 14 points, or 0.6%, during the four sessions.

The dollar tumbled against foreign currencies, reaching a one-and-a-half-year low against the euro. The selloff was partly exacerbated by thin trading conditions. Following the dollar's decline, gold futures jumped higher by $10.10 to $645.50 an ounce.

The Nymex was closed Friday, marking the first time the Chicago Board of Trade's contract for precious metals has been open while the Nymex is closed.

An ensuing rally in commodity-related shares gave little support to the broader market. Miners Barrick (ABX Quote) and Newmont (NEM Quote) rose 2.4% and 1.5%, respectively. The Amex Gold Bugs index gained 2.5% and the Philadelphia Gold & Silver Sector index added 2.3%.