Stocks Pull Back as Dollar Strengthens
NEW YORK (
) -- Stocks closed modestly lower Wednesday as a flare-up of concerns about Europe's debt situation overshadowed a flurry of better than expected U.S. economic reports.
The Dow fell 19 points, or 0.2%, to finish at 11,457, breaking a streak of three consecutive positive sessions. The blue-chip index ranged from 11,519-11,445 for the day. The
S&P 500
shed 6 points, or 0.5%, to close at 1235, and the
Nasdaq Composite
fell 10 points, or 0.4%, to settle at 2617.
Caterpillar
(CAT) - Get Report
,
Microsoft
(MSFT) - Get Report
and
Coca-Cola
(KO) - Get Report
led the Dow, while
Alcoa
(AA) - Get Report
,
General Electric
(GE) - Get Report
and
JPMorgan Chase
(JPM) - Get Report
were the index's biggest laggards.
A stronger dollar pressured basic materials and energy stocks, with financials also losing heavily. Healthcare was the only sector that finished higher on Wednesday. Market breadth was negative with two out of three stocks traded on the New York Stock Exchange ending in the red. Overall, volume totaled 1.12 billion on the Big Board and 1.87 billion on the Nasdaq.
The Senate voted 81-19 in favor of the $858 billion tax-cut bill
to extend the Bush era tax cuts another two years. Market reaction to the vote was sedate. The bill now moves to the House, where it faces a bigger challenge with House Democrats strongly opposing some of the provisions in the current deal.
The 10-year note was down by 15/32, lifting the yield to 3.530%. Bonds have come under pressure as some investors worry that the tax deal will lead to mounting deficit while others are switching to stocks in hopes of a recovery.
.
The resurfacing of euro-zone debt concerns was prompted by
Moody's
(MCO) - Get Report
, which placed Spain's Aa1 debt rating on review for a possible downgrade. The ratings agency cited Spain's high refinancing requirements in 2011 and concerns about the government's ability to resolve the country's financial troubles.
The dollar traded higher against a basket of currencies, with the dollar index rising 0.9%. The euro lost ground against the dollar, falling 0.8% to $1.3266.
Positive U.S. economic data fueled early bullishness. The
Federal Reserve
said industrial production rose 0.4% in November, after declining by 0.2% in October. Wall Street had been anticipating a 0.3% uptick, according to Briefing.com. Capacity utilization jumped to 75.2% from 74.8%, previously, exceeding the level of 75% that economists had been projecting.
Also,
manufacturing activity in the New York area strengthened in December as the New York Fed's Empire State manufacturing index rose to a reading of 10.57 from the prior month's level of -11.14. Economists had been projecting a reading of 3, according to Briefing.com.
"There was good news on industrial production, although because of what's been happening with the decline in the U.S. dollar, we expected exports to do well, and we saw that in last week's trade data," said Kevin Pianko, audit partner and head of the manufacturing distribution practice at WeiserMazars, an accounting and consulting firm headquartered in New York City.
Meanwhile,
muted in November as the Department of Labor said consumer prices rose 0.1% in November, which was slightly below the 0.2% uptick that economists had been anticipating. The core rate, which excludes volatile food and energy prices and is a widely accepted measure of inflation, grew 0.1%, meeting expectations. In October, consumer prices increased 0.2% and the core rate remained unchanged.
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Pianko said that Wednesday's inflation data is good for consumers but warned that rising commodity prices signal price increases are on the horizon. Furthermore, Pianko pointed to the bond market as evidence that the market is adjusting for the
Federal Reserve's
stimulus plan and expecting inflation to pick up in the next several months.
"There's a lot of liquidity in the marketplace right now. It's only a matter of time before that liquidity is used to push prices higher," he said.
In corporate news, the Justice Department is suing
BP
(BP) - Get Report
,
Anadarko Petroleum
(APC) - Get Report
and
Transocean
(RIG) - Get Report
and six other defendants for damages caused by the Gulf of Mexico oil spill. Shares of BP fell 1.3% to $43.86, while shares of Anadarko and Transocean declined by about 2% and 1% respectively.
Joy Global
(JOYG)
saw its stock jump 6.9% to $85.78 after the mining-equipment company surpassed analysts' estimates with fourth-quarter net earnings of $1.39 a share on sales of $1.05 billion. Wall Street had been expecting a profit of $1.16 a share on sales of $922.8 million.
Novartis
(NVS) - Get Report
plans to acquire the 23% stake of eye-care company
Alcon
(ACL)
that it doesn't already own for $12.9 billion. Shares of Novartis gained 5.6% to $58.99, and Alcon's stock closed ahead by 1% at $164.10.
Shares of
Dynegy
(DYN)
were up 3.3% to $5.63 after the company
agreed to be acquired by
Icahn Enterprises LP
for $5.50 a share in cash, or $665 million.
Shares of transportation company
Ryder Systems
(R) - Get Report
surged 4.7% to $49.88 after RBC Capital Markets upgraded it to outperform.
Shares of
First Horizon
(FHN) - Get Report
were up 1.9% to $10.65 as its plans to raise debt to repay TARP.
Canada's Competition Bureau is targeting "restrictive and anti-competitive" rules employed by credit card providers
Visa
(V) - Get Report
and
MasterCard
(MA) - Get Report
that raise costs for both merchants and consumers, the agency said. Shares of Visa shed 4.5% at $76.94. Mastercard shares were lower by 1.9% at $249.22.
Real estate company
St. Joe
(JOE) - Get Report
soared 9% to close at $19.40 on takeover speculation. Hedge fund
is short the stock, pitting him against value investor
who has been accumulating the stock.
Boston Beer
(SAM) - Get Report
jumped 12% to $94.97 after the
brewer raised its 2010 outlook.
In other news, the National Association of Home Builders said the gauge of business conditions for homebuilders remained unchanged at 16 in December. Economists had expected the housing market index to inch up to a reading of 17, according to Briefing.com.
The Energy Information Administration said crude oil supplies shed 9.85 million barrels in the week ended Dec. 10, exceeding the decline of 3 million barrels that analysts polled by Platts had been expecting.
Late Tuesday, the American Petroleum Institute said crude stockpiles lost 1.44 million barrels. The January crude oil contract was up by 34 cents to settle at $88.62 a barrel.
Elsewhere in commodities, the February gold contract, the most actively traded gold future, shed $18 lower at $1,386.20 an ounce.
Overseas, Hong Kong's Hang Seng dropped 2% and Japan's Nikkei shed 0.07%. The FTSE in London managed to turn positive, up by 0.02% while the DAX in Frankfurt was off by 0.08%.
--Written by Melinda Peer and Shanthi Bharatwaj in New York
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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.