Stocks were mostly lower Monday as the dollar rose amid concerns over European soveign debt troubles ahead of a meeting of G-20 leaders that will address currency policies.
The Dow Jones Industrial Average fell more than 40 points Monday at the start of a new trading week, after stocks reached two-year highslast week.
Boeing , Travelers , and Home Depot led the blue-chip index lower, while Hewlett-Packard and Bank of America gained.
The S&P 500 Index and the Nasdaq fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose to nearly 19.
Most key S&P sectors declined, led by utilities, financials and consumer staples. The tech sector was up slightly.
After a week busy of U.S. news, including the mid-term elections, the Fed's decision to pump $600 billion in the economy, and a strong October jobs report, investors were turning their attention to Europe, where the Irish bond market was suffering from the government's plans to double spending cuts and to increase taxes to trim its deficit.
As a result, the dollar rose against a basket of currencies, and gained nearly a full percentage point against the euro. Stocks have moved inversely to the stock market, and Monday was no exception, as the broader market declined.
Debt troubles within the so-called "PIGS" nations, of Portugal, Ireland, Greece and Spain, won't go away any time soon, said Uri Landesman, president of Platinum Partners, a hedge fund.
If the market ends higher for the year, with the S&P 500 Index at 1,275 or more, "my initial prediction for next year is a flat market" in 2011, Landesman said.
That's because there's a "20 percent probability of a major systemic shock next year, driven by the dollar and the PIGS," he said. "I don’t see it going away."
Boeing skidded after news the aircraft maker will delay delivery of the 787 Dreamliner for as much as 10 months, according to Aviation Week.
Technology and media companies were in focus after the Wall Street Journal reported on Sunday that AOLwas exploring strategic options, which include a possible tie-up with Yahoo . AOL has retained financial advisers.
Also, Amazon.com was reportedly planning to buy Diapers.com parent Quidsi in a $540 million deal.
Hewlett-Packard got a boost from UBS, which raised its price target for the computer maker to $48 a share from $44, and put a short-term "buy" rating on the stock.
JDS Uniphase's shares jumped to the top of the S&P gainers after the telecommunications equipment maker received a nod from Barron's, which said the company would benefit from a burst of interest in Web video. JDS Uniphase is working with manufacturers to boost capacity on the Internet to allow for more video traffic.
Intel shares were slightly higher after the tech giant was upgraded by UBS to "buy" from "hold," but the performance of the rest of the semiconductor market was mixed as National Semiconductor was downgraded by RBC to "underperform" from "sector perform," as the brokerage believes the chip maker isn't in step with rivals in the smartphone market.
Meanwhile, DISH Network's shares fell after UBS downgraded the company to "neutral" from "buy" and cuts its price target to $23 a share from $26, citing concerns about the company's ability to grow. Evercore Partners, however, raised the pay-TV company's shares to $26 a share from $24.
McDonald's shares were slightly lower after news the fast-food restaurant chain's U.S. sales disappointed. Overall, however, the company's same-store sales rose 6.5 percentin October, more than expected by Wall Street and the company.
The food-service distributor Sysco's sales dropped after it reported an 8.3 percent slide in its fiscal first-quarter earnings in part because of rising food costs.
Safeway's shares skidded after UBS cut the grocery store chain to "sell" from "neutral," while Hain Celestial Group's shares rose after Jefferies, RBC and Barclays raised their price targets for the organic foods company.
GT Solar soared after the solar-equipment maker reported its profit quadrupled, thanks to strong sales and higher margins. The company also boosted its 2010 guidance.
Coventry Health Care's shares soared after at least four brokerages raised their price targets for the health care insurer. Wells Fargo also raised their rating on the company to "outperform" from "market perform."
Among financials, Citigroup'sdebt funds were under scrutinyby the U.S. Securities and Exchange Commission, which is assessing whether the bank adequately disclosed to investors the risk levels in the funds, the Wall Street Journal reported.
Although the dollar rose Monday, and commodity prices fell, the reverse has largely been the case as a result of the Fed's plans to boost the economy with bond purchases. If the Fed's policies do in fact generate inflation, the Fed could review its policy path, Kevin Warsh, a Fed board governor, said in an op-ed article in the Wall Street Journal Monday. Warsh was also scheduled to speak this afternoon.
President Obama travels to the G-20 meeting in Korea Thursday and Friday. Fellow G-20 members, such as China, Germany and Brazil, have been vocal about their dislike of quantitative easing and its impact on the declining dollar.
The gathering will also address China's resistance to a more flexible currency policy.
World Bank chief Robert Zoellick suggested the re-adoption of the gold standard could ease global currency tensions as demonstrators gear up for the upcoming G20 summit.
Writing in the Financial Times, Zoellick, the bank’s president since 2007, said a successor is needed to what he calls the “Bretton Woods II” system of floating currencies that has held since the Bretton Woods fixed exchange rate regime broke down in 1971.
Trade and weekly jobless claims are the highlights among U.S. economic data out this week, after the surprise gain in October employmentreported last week. The weekly report on U.S. jobless claims will come on Wednesday this week because the bond market is closed on Thursday for Veteran's Day.
In Europe, shares edged lower as investors took profit, although Greek banks lead financials higher as investors breathed a sigh of relief that the country’s Prime Minister did not call early elections.
On Tap Next Week:
MONDAY: St. Louis Fed pres Bullard speaks, Dallas Fed pres Fisher speaks, Fed governor Warsh speaks, 3-yr note auction.
TUESDAY: NFIB small biz optimism index, Wholesale trade, 10-yr note auction, SCOTUS hears AT&T class action case.
WEDNESDAY: Weekly mortgage apps, Jobless claims, International trade, Import & export prices, Oil inventories, CFTC hearing on Dodd-Frank, 30-yr bond auction, Earnings from GM, Macy’s and Cisco.
THURDSAY: Veterans Day – Bond market closed, stocks and futures markets open, G20 mtg. begins, Earnings from Kohl’s, Disney and Nvidia.
FRIDAY: APEC CEO summit, Consumer sentiment, Earnings from DR Horton and JCPenney
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