NEW YORK – U.S. stocks fell Tuesday – the most in two months – as the dollar strengthened to near a 12-year high versus the euro amid speculation the Federal Reserve is moving closer to raising interest rates.
Intel and Cisco Systems lost at least 2.4 percent as technology companies in the Standard & Poor’s 500 index led declines. United Technologies, Goldman Sachs Group and Home Depot dropped more than 1.8 percent to pace losses among the biggest companies.
The S&P 500 retreated 1.7 percent to 2,044.16 at the close in New York, falling below its average price for the past 50 days for the first time since Feb. 9. The Dow Jones industrial average lost 332.78 points, or 1.9 percent, to 17,662.94. Both indexes erased gains for the year. The Nasdaq 100 Index fell 1.9 percent. About 7.1 billion shares changed hands on U.S. exchanges, 2.8 percent above the three-month average.
“A continuation of dollar strength and euro destruction is certainly raising some concerns,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities, said. “I don’t think there was any one specific event or item that caused this, but the fact that it’s a trend that’s been going on for the last several weeks is concerning given the levels we’re at now.”
Concern the Fed may start raising interest rates this year amid a strengthening economy has weighed on equities and helped boost the dollar.
In his last speech as president of the Fed Bank of Dallas, Richard Fisher said the central bank should begin to gradually raise rates before the economy reaches full employment to avoid triggering a recession.
The S&P 500 fell 1.6 percent last week, the most since January, as data showed the jobless rate reached the central bank’s range for what it considers full employment. Policy makers next meet on March 17-18.
The Fed stands out among major central banks in accepting a higher exchange rate as a sign of economic strength. Peers from Sydney to Wellington, Tokyo, Zurich and Frankfurt are cutting rates and buying government bonds to stimulate growth and, in the process, sometimes weakening their currencies.
The dollar has rallied this year versus 14 of 16 major currencies, including the yen, pound, euro and Brazilian real.
“The dollar’s going up so much so fast you wonder what it does to U.S. economic growth down the road, to profitability,” Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees $338 billion, said by telephone.
The S&P 500 has entered the seventh year of a bull market, pushing valuations near a five-year high. The index has more than tripled from its bear-market low on March 9, 2009, buoyed by three rounds of Federal Reserve bond-buying and low interest rates.
Tuesday’s drop was broad-based as all of the S&P 500’s 10 main groups retreated, and 4 out of 5 stocks fell. All but three of the 24 developed-nation indexes declined while the MSCI All-Country world index sank 1.7 percent, the most in two months.
Technology, financial and industrial companies paced declines in the U.S., down at least 1.8 percent, with financials falling the most since April.
The S&P 500 is down 0.7 percent for the year, after rallying 11 percent in 2014 and 30 percent in 2013. The equity benchmark trails all but one of 24 developed markets in 2015, data compiled by Bloomberg show.
