U.S. stocks closed lower Thursday as a stronger dollar put downward pressure on equities and other riskier investments, including commodities. Additional downward pressure came from a Bank of America Merrill Lynch downgrade of chipmakers. Materials, energy, and industrial stocks were among the hardest hit.
Growing concerns about a possible "double-dip" recession were weighing on the market, according to S&P MarketScope.
On Thursday, the 30-stock Dow Jones industrial average was lower by 93.87 points, or 0.90%, at 10,332.44. The broad Standard & Poor's 500-stock index was down 14.90 points, or 1.34%, at 1,094.90. The tech-heavy Nasdaq composite index lost 36.32 points, or 1.66%, to 2,156.82.
On the New York Stock Exchange, 25 stocks were lower in price for every six that advanced. Breadth on the Nasdaq was 21-5 negative.
The tech sector was dented by a Bank of America Merrill Lynch downgrade on the growth outlook for the semiconductor sector, along with lowered outlooks for Intel (INTC) and Texas Instruments (TXN).
Meredith Whitney, the independent equity analyst who has no "buy" recommendations on U.S. banks, said valuations on lender stocks are too high and what "scares" her most is the government stepping away from buying mortgage-backed securities. "The banks are still grossly overvalued," Whitney said Thursday in an interview on Bloomberg Radio. "People are expecting something great to happen in 2010 and I think they are going to be severely disappointed."
Economic data Thursday was mixed. The Philadelphia Fed index rose to 16.7 in November, above economists' median forecast of 12.0, from 11.5 in October.
The U.S. index of leading economic indicators rose 0.3% in October, below the median forecast of 0.4%, marking a seventh consecutive monthly gain.
U.S. weekly initial jobless claims were unchanged at 505,000 while continuing claims fell 39,000 to 5,611,000.
Treasuries were mixed Thursday. The 10-year note was up at 100-05/32 for a yield of 3.330%, while the 30-year bond was flat at 101-9/32 for a yield of 4.302%.
The dollar index was up at 75.31.
December gold futures were up at $1,145.10 per ounce, reversing earlier losses.
December West Texas Intermediate crude oil futures were off at $77.65 per barrel.
European stocks finished lower Thursday. In London, the FTSE 100 index was off 1.39%.
The CAC 40 index in Paris fell 1.77%.
Germany's DAX index declined 1.48%.
Asian markets finished mixed Thursday. Japan's Nikkei 225 index slumped 1.32%. Sentiment was hurt by news Wednesday that Tokyo Mitsubishi UFJ Financial Group Inc., Japan's biggest bank, announced plans to raise up to 1 trillion yen ($11.2 billion) through a public offering intended to shore up its capital base.
The Hang Seng index in Hong Kong fell 0.86%.
Shanghai's benchmark index rose 0.53%.
In company news Thursday, Sears Holdings (SHLD) reported a narrower than expected third-quarter loss of $127 million, vs. a loss of $146 million a year earlier.
Williams-Sonoma (WSM) posted third-quarter non-GAAP EPS of 16 cents, vs. a loss of 10 cents per share one year earlier, on a 1.7% rise in same-store sales and a 3.0% total sales drop. The company raised fourth-quarter sales and earnings guidance.
In Washington, Treasury Secretary Timothy Geithner said Thursday the government's $700 billion bailout program will end "as soon as we can," and that part of it will be used to lower the soaring federal debt.
During a sometimes contentious Joint Economic Committee hearing that included one lawmaker calling on him to resign, Geithner was pressed to disclose the administration's plan for dealing with the unpopular financial rescue program.
"We are winding it down and will close it as soon as we can," Geithner said of the $700 billion bailout fund, known as the Troubled Assets Relief Program. Congress approved TARP at the height of the financial crisis in October 2008 as a way to supply banks with fresh capital.
President Barack Obama told Chinese leaders this week the U.S. expects to see progress by next year on making the yuan's exchange rate "more flexible," Ambassador Jon Huntsman said Obama in meetings in Beijing with President Hu Jintao and Premier Wen Jiabao said the U.S. wants progress on issues including the exchange rate by next summer, when talks between the U.S. State and Treasury secretaries and their Chinese counterparts are scheduled in the city, Huntsman said in an interview with Bloomberg Television.
In other economic news Thursday, U.S. mortgage delinquencies continued to climb in the third quarter, rising at a 9.64% seasonally adjusted rate (for 1-4 unit residential properties). That's a new record, besting the previous 9.24% clip in the second quarter, and a 9.12% pace in the first, according to the Mortgage Bankers' Assn.
Fed officials downplayed the consequences of the falling U.S. dollar, underscoring that deflation is still a threat, especially with commercial real estate prices falling. Dallas Fed President Richard Fisher said in an interview with Market News International that the weakening dollar, which hit a 15-month low against major currencies on Monday, is only one of the factors the Fed watches when setting policy. "You pay attention to this," Fisher said in reply to a question about the effects of a weaker dollar. "On the other hand, in terms of its inflationary input, unless it becomes disorderly, a depreciating dollar -- a gradually depreciating dollar -- doesn't necessarily add an enormous inflation impulse."
Philadelphia Fed President Charles Plosser, answering journalists' questions after a speech in Singapore, was also not worried about dollar weakness. "There's no particular reason you wouldn't expect the dollar to go back to where it was before the panic set in -- that is essentially all it has done at this point. I don't view that as anything particularly of concern," he said.
The OECD raised its global growth forecast for next year to 3.4% from the 2.3% it was predicting as recently as June, after an estimated contraction of 1.7% in 2009. In June, the OECD was predicting growth of less than 1% in 2010 in all three regions and for the 30 OECD member countries as a whole. It now sees GDP growth of 1.9% in 2010 and 2.5% in 2011, after a contraction of 3.5% in 2009. U.S. growth, measured by gross domestic product, should rise 2.5% in 2010 after a contraction of 2.5% in 2009, and rise a further 2.8% in 2011, the OECD said. Euro zone GDP should rise 0.9% in 2010 and 1.7% in 2011 after a downturn of 4.0% in 2009, it said. Japan could expect GDP growth of 1.8% in 2010 and 2.0% in 2011 after a drop of 5.3% in 2009, it said.
The OECD forecast growth of more than 10% in China this year due in large part to massive stimulus that it believes maintained GDP growth at more than 8% in 2009, when output was shrinking across the West. India, which likewise weathered the crisis with growth of an estimated 6.1% in 2009, could expect 7.3% growth next year and a bit more in 2011, while Brazil, another fast developer, was headed for growth of 4.8% in 2010.