NEW YORK (AP) — Investors dumped stocks and sought safe-haven assets like the dollar and Treasurys following signs that the global economy is still struggling.
Reports in Britain and Germany showed that manufacturing remains weak, while Japan’s government approved $81 billion in stimulus measures to keep its economy out of recession. Meanwhile, a leading credit rating agency has cut its ratings on six Dubai state-linked companies due to worries about their growing debts.
A disappointing earnings forecast from Dow Jones industrials component 3M Co. and a weak sales report from McDonald’s Corp., another Dow company, also pulled stocks lower.
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Investors sent the dollar and Treasury prices higher in response to the day’s news. Commodities fell as the dollar rose. A stronger dollar makes commodities more expensive for buyers overseas, and also hurts profits at companies that have large international operations.
After the massive rally in stocks and commodities this year, investors are looking for clues about where the economy is headed and how best to position their portfolios for next year. Investors are uncertain of how long the environment of low interest rates and a weak dollar that helped fuel the market’s rally will last.
At the same time, there are still plenty of doubts about the economic recovery to drive cautious investors to pad their portfolios with safe havens. With the Standard & Poor’s 500 index up 63.1 percent since early March, many investors are looking to protect their gains.
Later Tuesday, President Barack Obama will give a speech outlining how he plans to create more jobs. High unemployment has been one of the economy’s biggest obstacles to growth. A report from the Labor Department on Friday showing far fewer job losses in November than expected initially gave the market a boost. But stocks have struggled to move higher since then as investors question whether the improvements in the labor market are actually sustainable, and if they are, whether the Fed might raise rates sooner than expected.
In midmorning trading, the Dow fell 108.15, or 1 percent, to 10,281.96. The Standard & Poor’s 500 index fell 10.77, or 1 percent, to 1,092.48, while the Nasdaq composite index fell 20.66, or 0.9 percent, to 2,168.95.
Stocks finished little changed on Monday after reassurance from Fed Chairman Ben Bernanke that interest rates will remain low to support an ongoing recovery failed to galvanize investors.
Shares of 3M fell after the consumer products maker predicted adjusted earnings of $4.50 to $4.55 per share for the full year. That’s below a profit of $4.57 per share forecast by analysts. The stocks fell $1.78, or 2.3 percent, to $76.13.
McDonald’s shares fell $1.46, or 2.4 percent, to $60.47 after the world’s largest fast-food chain said monthly sales in the U.S. fell in November.
Offsetting some of the weak reports, FedEx Corp. raised its earnings forecast for the November quarter late Monday. Shares of the package delivery company shot up $2.27, or 2.6 percent, to $89.79.
Bond prices rose, sending yields lower. The yield on the benchmark 10-year Treasury note fell to 3.37 percent from 3.43 percent late Monday.
The ICE Futures US dollar index, which tracks the dollar against other major currencies, rose 0.2 percent.
Gold prices fell for a third straight day.
Oil fell $1.21 to $72.72 per barrel on the New York Mercantile Exchange.
Four stocks fell for every one that rose on the New York Stock Exchange, where volume came to 160.1 million shares compared with 141.2 million shares traded at the same point Monday.
The Russell 2000 index of smaller companies fell 6.00, or 1 percent, to 597.56.
Overseas, Japan’s Nikkei stock average fell 0.3 percent. In afternoon trading, Britain’s FTSE 100 fell 1.8 percent, Germany’s DAX index slid 2 percent, and France’s CAC-40 fell 2.1 percent.
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