US stocks opened sharply lower as better than expected economic data sent the dollar soaring to a month high sending investors to havens such as treasury bonds.
Reports by the government showed that the economy was firming up, stoking fears among investors that the Federal Reserve would hike the country’s lending rates earlier than expected.
The Dow Jones industrial Average most recently dropped 225.15 points or 1.24% at 18,030 points after breaking even earlier in the day.
The S&P 500 Index fell by 24.90 points or 1.17% at 2104 points with all ten of its major sectors trading in the red.
The technology heavy Nasdaq Composite fell by 56 points or 1.1% at 5033 points with Apple Inc leading the losses with a 1.2% decline to $130 per share.
According to the data, orders for durable goods in the US fell by 0.5% in April with economists polled by the Wall Street Journal expecting a more modest decline of 0.1%. Orders in the key business investment category, however, advanced by 1%.
“In my view it is the strength of the durable goods report that built on last week’s core CPI reading (which showed inflation at the consumer level rising more than expected); the combination has pushed the dollar higher, and pulls forward expectations for the anticipated Fed rate hike,” says Mark Luschini, chief investment strategist at Janney Montgomery Scott, told USA Today.
“The stronger dollar works to crimp multinational profits, which represent over 40% of S&P 500 cumulative profits,” he adds, “and the (tick higher in consumer inflation) worries investors that “hike soon but go slow” may become “hike sooner and go faster.”
In other data, house prices in the US jumped by 0.9% in March to take their growth to 5%. New home sales also improved better than expected during the month to lend credence to speculation that the economy was firming up after a difficult few months.
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