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Stocks Turn Lower as Dollar Claws Back

Cindy Perman|CNBC.com
Monday, 26 Oct 2009 | 1:01 PM ET

Stocks retreated Monday, led by financials, as the dollar rebounded and Dutch bank ING announced plans to split in two.

Stocks had opened higher, following an upbeat economic report and a couple of earnings beats, but that all evaporated.

The Dow Jones Industrial Averagewas down more than 60 points in early afternoon trading, led by Bank of America and JPMorgan. This came after the blue-chip index snapped a two-week winning streaklast week.

The dollar gained against major currencies in what some analysts said was a technical rebound.

"Most major currencies including the euro are running out of steam," Kathy Lien, director of FX research at GFT, told Reuters. "Specifically, the euro's earlier rally wasn't really supported by data as we saw the German consumer confidence was actually weaker."

As the dollar rose, oil and gold fell — oil fell below $79 a barrel after earlier topping $81. Gold dropped $10 to around $1,046 a troy ounce.

Many analysts are predicting gold will go to $1,500 — or even higher — but Brian Belski, chief investment strategist at Oppenheimer, said he's not so sure.

"I believe the long gold/short dollar trade is as crowded right now as the long tech trade was in 1999," Belski said on CNBC this morning. "Typically and historically when you have everybody agreeing on the same trade, you should become worried."

Plus, Belski said, the typical reasons investors turn to gold — the market's headed south or hyperinflation — aren't there right now.

Among the sectors Belski likes right now are tech, industrials and healthcare.

Meanwhile, ING's split will strip the Dutch financial giant of much of its global profile and return it to its roots of being a small European lender. As part of the split, ING will have to sell its U.S. online-banking unit, ING Direct. This is the latest example of sweeping change imposed on firms that took government bailout money.

U.S.-traded shares of ING tumbled more than 15 percent.

That piled on to the pressure already on financials after Rochdale Securities analyst Richard Bove downgraded three of the industry's bigger names — SunTrust, Fifth Third Bancorp and US Bancorp .

Caterpillar announced plans to rehire more than 500 laid off employees by the end of the year.

On the earnings front, Verizon narrowly beat earnings estimates and added more subscribers than analysts had expected.

Corning beat earnings expectations and forecast 15 percent growth in the market for glass for flat-screen TVs.

RadioShack shares shot up more than 10 percent after the electronics retailer, which has struggled in recent years, beat revenue expectations as its push into the cell-phone market paid off.

The tech-heavy Nasdaq outperformed the broader indexes after a slew of analyst upgrades Microsoft .

Some encouraging news on the economic front: A new survey by the National Association for Business Economics showed U.S. companies expect to hire more peopleand invest more during the next six months — the most optimistic NABE survey in a year.

Later this week, we'll get the first look at third-quarter GDP — economists expect to see the e economy grew 3.3 percent.

"The story of the earnings season is fading, and most people will now be looking at the economic data and the trend of the U.S. currency," Peter Cardillo, chief market economist at Avalon Partners, told Reuters. "All in all, this market is headed into a consolidation phase as we get into the full swing of economic numbers this week."

Novatel Wireless shares jumped after Barron's said the stock could move toward $20 due to sales from a new Wi-Fi network device.

Terradata shares got a boost after Barron's said the company could hit $52 if revenue growth hits expectations.

And Legg Mason shares benefited from news that Nelson Peltz will be elected to the company's board, a move that will avoid a proxy fight. Peltz owns Trian Fund Management, which holds about 4.3 percent of Legg Mason's shares. He agreed that he would not accumulate more than 9.9 percent for the next two years.

Another sign that real estate is still struggling: Capmark Financial Group, one of the largest U.S. commercial-real-estate lendersfiled for bankruptcy protection.

As October draws to a close, the S&P 500 and the Nasdaq remain on track for their eighth consecutive monthly gains and their best yearly gains since 2003.

A relatively light economic calendar today, with no major economic stats on the docket, but the Treasury will be auctioning $7 billion in TIPS, with results available shortly after 1 pm New York time. It's the start of a record $123 billion in auctions this week.

— Peter Schacknow contributed to this article.

This Week:

TUESDAY: Case-Shiller home-price index; Conference Board consumer confidence; Ruth Madoff hearing; Earnings from BP, Visa and US Steel
WEDNESDAY: Weekly mortgage applications; durable-goods orders; new-home sales; weekly crude inventories; executive-compensation hearing; Earnings from ConocoPhillips, GlaxoSmithKline and General Dynamics
THURSDAY: 80th anniversary of 1929 market crash; Weekly jobless claims; first look at Q3 GDP; Larry Summers speaks in NYC; Earnings from AstraZeneca, ExxonMobil, P&G, Aetna, Kellogg, Motorola and Sprint Nextel
FRIDAY: Personal income and spending; consumer sentiment; Earnings from Chevron

Send comments to cindy.perman@nbcuni.com.

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