Stocks fell Wednesday as a downgrade on Portugal's credit rating sent the dollar higher and stocks and commodities lower.
The Dow was down almost 40 points in midday trading, led by P&G , Verizon and Chevron .
GE and Bank of America were among the handful of gainers.
This came after Tuesday's rally as investors cheered a better-than-expected report on existing-home sales. All three major indexes hit fresh 1 1/2-year highs.
Art Hogan, the chief market analyst at Jefferies, said he thinks today's move was all Portugal-dollar-commodities but that the prognosis for the market is good.
"I really feel like this market is on a path higher in the near term," Hogan said. "The first quarter is about to wrap up and there are virtually no preannouncements from Corporate America — that means earnings are are going to be much better," Hogan said.
"I think there's another 10 percent to the upside by year end," Hogan said.
Fitch cut its rating on Portugalby one notch to AA- and warned that another downgrade could be on the way.
The dollar ralliedagainst the euro after the downgrade, which sent commodities prices lower. Oil dropped to near $80 a barrel, while gold fell to a six-week low,near $1,090 an ounce.
In this morning's economic news, new-home sales fell 2.2 percent to 308,000, the lowest on record, in February. Economists had expected to see a 1.9-percent increase. Still, the 2.2-percent decline is a much slower pace than the 11.2-percent drop recorded in January.
Orders for durable goods, big-ticket items such as cars and refrigerators, rose 0.5 percentin February as inventories increased by the most since December 2008. It was the third straight monthly increase but fell short of the 0.7-percent gain expected.
And mortgage applications fell for a second straight weeklast week as interest rates crept higher.
Treasury prices extended lossesas investors soured on the latest round of debt auctions, greeting a sale of five-year notes with low demand. The $42 billion sale fetched a high yield of 2.605 percent, and the bid-to-cover ratio was 2.55.
Kansas City Fed President Hoenig, the lone dissenter in the last Fed meeting, said at a conference this morning that some form of the "Volcker rule," which limits large financial firms' speculative trading, should be includedin financial regulation.