Stocks Decline Thanks To Strengthening Dollar
On Thursday stocks declined sharply mainly as a consequence of increase in the value of dollar which gained on the back of Fed’s comments that economy still continues to be weak. The Dow Jones industrial average declined by 133 points (1.3%) to close at 10,308.26 points with 28 of the 30 Dow components registering a decline. Other indices also declined with the S&P 500 index declining by 13 points (1.2%) to close at 1,096.08 points. The Nasdaq composite also declined by 27 points (1.2%) to close at 2,180.05 points.
Sector wise all sectors declined on Thursday with the materials and financials registering the maximum decline of 2.3% and 1.8% respectively. Material stocks were under pressure mainly on account of increase in the value of dollar. Among the financial stocks leading the decline was Citigroup whose stocks were down by 7.5%. American Express stocks declined by 2% while JPMorgan Chase stocks declined by 2.6%. Other sectors which registered decline include Consumer Staples (decline of 1.3%), Consumer Discretionary (decline of 1.3%), Technology (decline of 1.2%), Industrials (decline of 1.0%), Health Care (decline of 0.9%), Telecom (decline of 0.8%), Energy (decline of 0.7%) and Utilities (decline of 0.6%).
The decline in stocks on Thursday was expected given the increase in the value of dollar which increased by 1.3% against the euro touching its highest levels since September. The dollar also increased against other currencies like the pound and the yen. Increase in the value of dollar is pulling the stock market down. The dollar strengthened on Thursday mainly on the background of Fed’s comment that the economy will continue to be weak for some continuing with its near zero interest rate. Also in another major development rating agency Standard and Poor downgraded Greece. Analyst feel that the continuing worries about the economy and downgrades will all strengthen the dollar and pull the markets down.
There were mixed news on the economy front. On the positive side was the news the November index of leading indicators increases by 0.9% as against an expectation of 0.7% increase. The jobless claims however increased last week increasing by 7,000 to 480,000.
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