Closing Market Report

Star-Bulletin news services

Sliding dollar drags
stock market lower

NEW YORK >> Stocks slid yesterday after finance ministers from leading industrial nations called for more flexible currency rates, sparking a tumble in the dollar and investor fears of dampened foreign investment. The Dow Jones industrials lost 109 points.

"It's a combination of profit-taking and weakness in the dollar that is concerning investors," said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, N.C. "If the dollar continues to fall, there is increasing risk that foreign investors will pull money out of U.S. stocks and bonds."

The Dow closed down 109.41, or 1.1 percent, to 9,535.41, having risen 1.8 percent in the previous week. It was the biggest one-day drop since Aug. 5, when the blue-chip average declined 149.72 points.

The Nasdaq composite index dropped 31.08, or 1.6 percent, to 1,874.62, following a weekly advance of 2.7 percent. The Standard & Poor's 500 index fell 13.48, or 1.3 percent, to 1,022.82, having gained 1.7 percent.

Decliners beat advancers 5 to 2 on the New York Stock Exchange. Volume was light at 1.62 billion shares, compared with 1.89 billion traded Friday.

The Russell 2000 index fell 6.55, or 1.3 percent, to 513.65. The NYSE composite index fell 76.78, or 1.3 percent, to 5,771.10. The American Stock Exchange composite index lost 2.40, or 0.2 percent, to 995.44.

The 2-year Treasury note was unchanged at 100 2 1/32, with its yield slipping 1 basis point to 1.66 percent. The 10-year note dropped 1632 to 100 632, with its yield rising 6 basis points to 4.22 percent.

Over the weekend, the ministers from the seventh largest industrial countries, or G7, said market forces should determine currency exchange rates, statements that many interpreted as support for a weak dollar. The dollar and overseas markets immediately fell on the news.

Foreign countries dislike a weak dollar because it makes their exports less competitive in overseas markets; U.S. investors, meanwhile, worry that foreign investors will stay away from devalued U.S. markets.

"I think the chances that earnings will continue to be pretty decent is out there," Kayes said. "If earnings are solid, I think the market will do well through the rest of the year."

Financial companies were among the biggest losers yesterday from the weak dollar. Merrill Lynch & Co. fell 99 cents to $56.40, while Goldman Sachs & Co. declined $1.07 to $92.66 and Morgan Stanley fell $1.23 to $51.15.

Wal-Mart Stores Inc. decreased $1.07 to $57.07 even though the world's largest retailer said September sales were on track to be on the high end of its forecasts despite disruptions from Hurricane Isabel.

Gainers included Motorola Inc., which rose 97 cents to $12.06, after Christopher Galvin resigned as its chairman and chief executive.

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