Stocks finished with losses on Tuesday as the U.S. dollar plunged amid growing concerns about trade friction between the U.S., China, and Europe. The euro reached an all-time high against the greenback of of $1.196 in afternoon currency trading.
The Dow Jones industrial average lost 86.67 points or 0.89% to 9,624.16. The Nasdaq was off 27.86 points or 1.46% to 1,881.75. The broader Standard & Poor's 500 index gave up 9.48 points, or 0.91%, to 1,034.15.
By the end of the session, traders were already looking to Wednesday's session when another pack of big names are due to report earnings. Among them are are computer and printer maker Hewlett-Packard (HPQ), telecom services provider Qwest Communications (Q), business software publisher Intuit (INTU) and Petco (PETC), a pet supplies retailer.
On the economic front on Wednesday, investors will get word on new home construction in October, which is expected to show a slight cooling off from September's pace. U.S. housing starts are seen slowing to a 1.86 million unit annualized rate from 1.89 million units, according to economic research firm MMS.
On Tuesday, worries of an escalating trade dispute with China and Europe were sparked by news that the Bush administration decided not to roll back steel tariffs -- and imposed new quotas on Chinese textiles. A drop in the dollar can be perceived as bad for U.S. equities as it can lead investors to queastion the value of dollar-denominated assets.
On Wall Street, investors were scrambling for more news on wire service reports that regulators were probing whether major investment banks arranged deals for Freddie Mac (FRE) that artificially cut the mortgage firm's earnings in quarters it was required to report huge derivative gains.
In economics news Tuesday, U.S. consumer prices were unchanged in October. The Consumer Price Index inflation gauge's core reading, which strips out food and energy prices, however, was up 0.2% vs. the 0.1% rise expected. But the economic research unit MMS International says the news was not expected to have an impact on markets.
In equities news, quarterly profits at home improvement retailer Home Depot (HD) rose 22%, topping estimates.
Office supply chain Staples (SPLS) said its quarterly earnings grew thanks to strong back-to-school demand for goods including office supplies, furniture and business machines and services.
Agilent Technologies (A) - news), which makes electronics and testing equipment, reported a a quarterly profit as cost cuts offset lower revenues.
And Saks (SKS), which operates department stores, reported sharply higher quarterly earnings, thanks to a tax credit.
Merrill Lynch raised its investment rating on General Electric (GE) to a "buy." The investment bank predicts the conglomerate will go back to cranking out double-digit annual profit growth after four years of relatively flat profits.
Meanwhile, drugmaker MedImmune (MEDI), put Wall Street on notice that its 2003 earnings will fall short of analyst estimates because of lower-than-expected sales of FluMist, the nasal spray flu vaccine that it co-markets with Wyeth (WYE).
As the mutual funds scandal continues to unfold, Federal Reserve Chairman Alan Greenspan and U.S. Treasury Secretary John Snow sent letters to Congress urging swift punishment for any mutual fund officials convicted of breaking the law.
Bonds ended with mild gains, maintaining a safety bid in afternoon trading Tuesday amid a plunge in the U.S. dollar. But MMS International notes that dropping foreign appetite for U.S. investments could well elevate yields. Shorter-dated issues underperformed in the wake of comments from Fereral Reserve officials that the central bank's policy stance will start to change as the threat of disinflation fades.
In other economics news, the U.S. BTM/UBSW chain store sales index fell 0.8% for the week ended November 15 after surging 1.2% the prior week, economic research unit MMS says. However, on a year-over-year basis, momentum picked up to a robust 6.2% pace from 5.8% previously. Sales were reportedly "uneven," though colder weather did help seasonal apparel sales. The industry is getting ready for the traditional start next week of the holiday shopping season, MMS says.
European stock markets closed lower on Tuesday after selling off in the previous session.
London's Financial Times-Stock Exchange 100 index was up 15.80 points, or 0.36%, to 4,354.70 as the U.K. inflation rate unexpectedly fell to a 10-month low in October. Wireless company Vodafone was higher after raising its dividend and announcing a share buyback.
In Paris, the CAC 40 lost 6.38 points, or 0.19%, to 3,352.92. Some traders were disturbed that France's September current account surplus narrowed 34%. Among the stocks trading higher were Thales, Alstom and Carrefour.
Germany's DAX index was down 8.26 points, or 0.22%, to 3,666.28. There was little reaction to Federal Statistics Office report that German employment rose in the third quarter as economic growth firmed.
Asian stock markets finished higher. Japan's Nikkei 225 index advanced 110.22 points, or 1.13%, to finish at 9,897.05, thanks to bargain hunters, after its sharp decline yesterday. Although there was no specific news, large cap stocks such as NTT (+2.79%) and Sony (+1.86%) started to attract buyers.
In Hong Kong, the Hang Seng index added 30.24 points, or 0.25%, to finish at 12,027.26.