U.S. Stocks Tumble
The latest in a series of setbacks in the dollar and news of a soaring trade deficit punished U.S. stocks Tuesday, with the damage quite broad in scope.
The Dow Jones Industrial Average was stung for a 225.43-point loss, or 2.1 percent, to 10,598.47. Since hitting a record-high a month ago, the barometer has shed 6.8 percent.
The Nasdaq Composite shriveled 65.05 points, or 2.3 percent, to 2,821.10. The Standard & Poor's 500 Index fell 2.1 percent. The Russell 2000 Index of small-company stocks sank 1.5 percent.
The dollar/yen exchange rate slid to 104.78 from Monday's 106.20 as a Bank of Japan policy-setting meeting produced no additional measures to ease monetary conditions. An easing of Japanese credit would have worked to weaken the yen and shore up the greenback, thereby increasing the attractiveness of dollar-denominated assets such as U.S. Treasury bonds.
A record U.S. trade deficit also contributed to the buck's woes. The gap widened to $25.18 billion in July from June's revised $24.60 billion. Most economists surveyed by CBS MarketWatch.com had expected a $22.3 billion deficit.
A weaker dollar hikes the cost of imported goods in the U.S., thereby lifting inflationary pressures. In the bond market, prices sank in reaction to the trade report and as the dollar buckled. The 30-year Treasury fell 14/32, to yield 6.097 percent.
"The thing that concerns me is that a lot of hope is being placed in third-quarter earnings," said Robert Stovall, president of Stovall/21st Advisers. "I hope they come through as expected because hardly a day goes by without some major company announcing a downgrading of expectations."
New York Stock Exchange losers whipped winners by 3.5 to 1. Decliners bested risers by more than 2 to 1 in the Nasdaq Stock Market.
On the Big Board floor, turnover jumped 39 percent to 787 million shares.
In the technology sector, hardware stocks fared the worst. Meanwhile, Internet issues, which have modestly outperformed the broader marker for the past six weeks, ekd out tiny rises.
The sectors leading the market fared especially poorly. Ssemiconductor, oil service and biotech stocks lagged the overall market.
Of note was the decline in electric utility issues, the second-biggest in six weeks. The stocks have a history of leading major turns in blue-chip averages.