Dow Faces Drop Due to Dollar Gains, Tech Stocks Lose
A surprise hike in China’s interest rate and an overall stronger dollar helped push the stock market down sharply on Tuesday, aided by disappointing news from IBM and Apple.
The Down Jones industrial average dropped below the 11,000 milestone for the first time in a bit over a week, working against a positive streak that had the overall market up seven percent for the year. The drop was the single largest since early August, pushed down by an announcement that China raised a key interest right in an attempt to fight inflation. China’s rapid growth has kept the economy afloat more than it would have otherwise.
The tech-heavy NASDAQ suffered as well, as Apple Inc. and IBM Corp. both reported bad news along with otherwise positive earnings reports for the previous quarter. Apple was unable to push as many iPads as some analyst were hoping, and one particular measure of profitability was lower than anticipated. IBM did not fare as well in its outsourcing operations as they were expected to.
Many of the concerns are based on the outlook for the fourth quarter of 2010. “On average, the earnings reports have beaten expectations, but now investors are asking, ‘What’s next?’,” offers Jonathan Satovsky, head of investment group Satovsky Asset Management. “Even Apple reduced guidance for the fourth quarter of the year.”
Against a basket of currencies, the dollar rose 1.7 percent, leading to a decline in commodities such as gold, which fell 2 percent.
