Stocks Pull Back on Rally in Dollar
A drop in housing starts and a rally in the U.S. dollar helped send stocks lower Wednesday as the news gave investors an incentive to collect profits.
Bonds also slid into negative territory on what was largely a quiet day on Wall Street.
Three stocks fell for every two that rose on the New York Stock Exchange. The Dow Jones industrial average fell 42.89 points, or 0.4%, to 10,671.99.
Among broader indexes, the Standard & Poor’s 500 index was down 5.17 points, or 0.5%, at 1,151.82, and the Nasdaq composite index lost 3.88 points, or 0.2%, to 2,076.47.
Rough winter weather was to blame for the 7.9% drop in residential building construction last month from December levels, the largest tumble in a year. However, the pace of residential construction in January was up 4.1% from the same month a year ago, giving investors a little good news to go with the bad.
In addition, gains by the dollar, coming off all-time lows against the euro, hurt shares of some blue-chip firms that have benefited as the weak dollar has boosted their foreign sales.
“Large caps will take the hit for the dollar rising,” said Michael Sheldon, chief market strategist at Spencer Clarke. “That’s sparked the selling you’re seeing here.”
Plus, the disappointing construction data raised new questions about the economy’s strength and whether it’s sustainable.
“There’s still a lot of uncertainty,” said Bill Groenveld, head trader for VFinance Investments.
In Wednesday’s trading, Walt Disney fell 19 cents to $26.71, the third straight decline. Shares of Comcast, which last week bid to buy Disney, inched up 5 cents to $30.80, the second straight advance. At Comcast’s closing price Wednesday, its stock-swap takeover offer was worth $24.02 per Disney share -- still 10% below Disney’s market price, although the gulf between the offer and Disney’s shares has narrowed from 16% a week ago.
Technology stocks fended off some selling on the strength of Rambus, after a federal court dismissed antitrust charges against the chip maker. Shares of the Los Altos, Calif., company shot up $9.09, or 35%, to $34.93.
The ruling clears the way for Rambus to seek royalties that may triple its revenue.
Some investors returned to Chinese Internet-related stocks, one of last year’s hot sectors. Netease.com surged $10.16 to $51.46 after the Beijing-based e-commerce company reported its fifth straight quarterly profit.
AT&T; Wireless Services shares, which soared Tuesday after Cingular Wireless locked in a $41-billion deal to buy it, slipped 6 cents to $13.72. The shares of Cingular’s parents, Baby Bells SBC Communications Inc. and BellSouth Corp., fell for the second straight day, weighing on the market.
The greenback rallied against major currencies, especially the euro, after comments from European officials made traders leery of possible European Central Bank intervention to cap the euro’s gains.
In New York trading, the euro fell 1.3%, to $1.271 after scaling a record peak earlier in the global day of $1.29. The dollar also rose more than 1% against the Japanese yen, to 106.72 yen.
In the U.S. Treasury market, bonds erased earlier gains and slipped into the red after the dollar rallied. Prices dropped on both the two-year and benchmark 10-year notes, sending yields higher. The yield on the 10-year note was 4.05%, up from 4.04% on Tuesday.
