US stocks slid on Friday, as renewed strength in the dollar pressured commodity-linked space while a surprise rate hike by India's central bank re-ignited worries about high borrowing costs undermining the global economic recovery.
Breaking a string of eight-straight gains, the Dow Jones Industrial Average ended down 37.19 points, or 0.4%, at 10,741.98. The S&P 500 index fell 5.93 points, or 0.5%, to close at 1,159.9. The Nasdaq Composite index shed 16.87 points, or 0.7%, to finish at 2,374.41.
Stock declines on Friday were broad-based, with 22 out of 30 Dow issues falling. Market breadth was negative.
More than 10.3 billion shares changed hands on US exchanges, the most since Feb. 5 and up 20% over the average in 2010, as the expiration of futures and options on stocks and equity indexes spurred trading. The process known as quadruple witching occurs every three months.
On the week, the Dow rose 1.1% while that S&P 500 added 0.9% and the Nasdaq gained a mere 0.3%. All the three major stock benchmarks rose for the fifth week out of the last six.
On Friday though, investors decided to step back after pushing the Dow, S&P 500 and Nasdaq composite to 18-month highs in the previous session.
The Dow ended the previous session at its highest point since Oct. 1, 2008. It has now broken its longest winning streak since August 2008. The S&P 500 finished the previous session at its highest point since Sept. 26, 2008 while the Nasdaq ended at its highest point since Aug. 28, 2008.
US stocks had gained on Thursday after reports showed that pricing pressure remains mild and the pace of job losses is slowing.
Coming back to Friday's session, Exxon Mobil and Dow Chemical dragged energy and raw-material producers to the biggest losses in the S&P 500 index as oil fell below USUS$80 per a barrel. Financial shares dropped after Goldman Sachs cut estimates for banks and brokerages.
Palm's worse-than-expected quarterly loss pummeled the technology and telecom stocks.
The Reserve Bank of India (RBI) unexpectedly raised rates for the first time since July 2008 after inflation accelerated to a 16-month high. India’s central bank increased the benchmark reverse repurchase rate to 3.5% from a record-low 3.25% and the repurchase rate to 5% from 4.75%. The surprise decision comes a month before the bank’s scheduled monetary policy meeting.
In addition, there are concerns that the US Federal Reserve could boost the discount rate, the amount charged on direct loans to banks. Wall Street economists feel this may occur before the next meeting of the Federal Open Market Committee, on April 28.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose for the first time in four days, advancing 2.1% to 16.97. The index, a measure of how much investors pay for insurance against declines in stocks, moves in the opposite direction of the S&P 500 about 80% of the time.
The dollar gained versus the euro and the yen, dragging on dollar-traded commodity prices.
The Dollar Index, a measure of the US currency’s performance against those of six major trading partners, advanced 0.6%. The euro fell as concern that Greece will fail to secure financial assistance from the European Union (EU) next week reduced demand for the common currency.
US light crude oil for April delivery fell US$1.52 to settle at US$80.68 a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery fell US$19.90 to settle at US$1,107.60 per ounce.
Treasury prices fell, lowering the yield on the 10-year note to 3.69% from 3.67% late on Thursday.
Smartphone maker Palm shares plunged 26% after reporting a steeper-than-expected quarterly loss after the close of trade on Thursday. Palm also said that a big build-up of inventory will drag on current-quarter revenue. Two brokerages cut their price target on the stock to US$0.