Stocks slide for third week
NEW YORK – The stock market was hit hard Friday, capping a third week of declines, as investors reacted to a steep drop in oil prices and a jump in the value of the dollar.
Utilities, companies that make basic materials like steel, and major exporters had the biggest declines.
The selloff came at the end of a volatile week and sets the stage for a Federal Reserve policy meeting next week. Investors will be watching closely for clues about the central bank’s views on the economy and interest rates.
“This week has really been about investors’ outlooks adjusting in the face of higher interest rates later this year,” said Gabriela Santos, a global market strategist at JPMorgan Funds.
Oil dropped sharply after the International Energy Agency said prices had further to fall because supplies were continuing to rise. Benchmark U.S. crude fell $2.21 to close at $44.84 a barrel in New York.
Several energy stocks followed the price of oil lower. Transocean, an offshore oil rig company, fell 67 cents, or 4.7 percent, to $13.60 and Denbury Resources fell 29 cents, or 3.8 percent, to $7.31.
The U.S. dollar continued its advance against other major currencies. The euro declined 1.3 percent to $1.0486. The U.S. dollar index, which measures the dollar against a group of other currencies, increased 0.8 percent Friday and is up 6.4 percent over the past month.
The dollar’s advance can be tied to two factors, strategists say. The U.S. economy is getting better, as seen by the strong jobs report last week, and the Federal Reserve is poised to raise interest rates sooner rather than later. In comparison, the European Central Bank is trying to drive down interest rates by buying government bonds, a tactic the Fed used until last fall. The ECB’s program has been driving down the value of the euro.
A higher dollar makes U.S. exports more expensive abroad. General Electric, Caterpillar and Deere fell more than the rest of the market. U.S. Steel, whose products compete with cheap foreign imports, fell nearly 4 percent after the company announced it would idle some of its operations and lay off workers.
“A rise in the dollar over a long period of time is fine, but this very rapid appreciation can directly impact companies’ profits,” Santos said.