Stocks End Mixed as Dollar Rises; Banks Fall
Special to CNBC.com
Stocks closed mixed with the broader market lower as European sovereign debt troubles drove the dollar higher.
The Dow Jones Industrial Average fell 37.24 points, or 0.3 percent, to close at 11,406.84, after stocks reached two-year highslast week.
Travelers , Boeing , and Home Depot led the blue-chip index lower, while Bank of America and Hewlett-Packard gained.
The S&P 500 fell 2.60 points, or 0.2 percent, to close at 1,223.25, while the Nasdaq rose 1.07 points, or 0.04 percent, to close at 2,580.05. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 18.
Most key S&P sectors declined, led by financials, utilities and industrials. Energy and materials sectors rose.
After a week busy of U.S. news, including the mid-term elections, the Fed's decision to pump $600 billionin 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 0.8 percent over 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," 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."
Declines in bank shares could go beyond profit-taking from last week's gains. A pledge from the Federal Reserve to keep interest rates near record lows was viewed as hurting bank profits.
Large financials including Goldman Sachs , JPMorgan and Morgan Stanley were all in the red.
Citigroupdebt 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.
Technology stocks were led higher by JDS Uniphase, which 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.
Hewlett-Packard , meanwhile,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.
Intel shares ended down despite an upgrade by UBS to "buy" from "hold." 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. Shares of rival AMD , however, advanced.
Meanwhile, DISH Network 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.
Oracle and SAP battled it out in a California court on Monday, as Oracle CEO Larry Ellison, charged SAP, its archrival, of stealing billions of dollars in copyrighted software.
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.
Amazon.com climbed after the online retailer said it plans to buy the owner of online shopping sites Diapers.com and Soap.com for $500 million, as it aims to sell more household items that need to be replenished.
Boeing skidded after news the aircraft maker will delay delivery of the 787 Dreamliner for as much as 10 months, according to Aviation Week.
McDonald's shares were slightly higher after news the fast-food company's same-store sales rose 6.5 percentin October, more than expected by Wall Street. McDonald's U.S. sales disappointed, however.
The food-service distributor Sysco's shares dropped after it reported an 8.3 percent slide in its fiscal first-quarter earnings in part because of rising food costs.
Safeway skidded after UBS cut the grocery store chain to "sell" from "neutral," while Hain Celestial Group rose after Jefferies, RBC and Barclays raised their price targets for the organic foods company.
GT Solar jumped 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 soared after at least four brokerages raised their price targets for the health care insurer. Wells Fargo also raised its rating on the company to "outperform" from "market perform."
Volume on the consolidated tape of the New York Stock Exchange was 3.9 billion shares. On the NYSE floor, 909 million shares changed hands.
Although the dollar rose, 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.
Other Fed officials had different views: James Bullard, president of the St. Louis Fed Reserve Bank, meanwhile, argued against criticswho said that the central bank's asset purchase program won't work.
"While asset purchases are sometimes viewed as unconventional, the financial market effects have been entirely conventional," said Bullard, who has a vote on Fed policy this year.
Meanwhile, Dallas Fed president Richard Fisher said the Fed's move can only succeed if lawmakers address the economy's root fiscal and regulatory ills.
"I would suggest that even if you share my cautious perspective on this matter, you might be assuaged by looking at this new initiative as a bridge loan to fiscal sanity,'' Fisher said.
Commodities were lower across the board amid the rising dollar. Oil prices touched a two-year high of $87.49 a barrel before easing to close at $87.06. Gold surged to an all-time high of $1,400 an ounce, following its largest two-day gain in a year at the end of last week.
Treasury prices slippedafter the government auctioned $32 billion of 3-year notes, which had a yield of 0.500 percent and a bid-to-cover ratio of 3.26. Auctions of 10-year and 30-year notes are expected on Tuesday and Wednesday, respectively.
President Obama travels to G-20 meetingin 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 because the bond market is closed on Thursday for Veteran's Day.
Coming Up This Week:
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.
THURSDAY: 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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