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Stocks fluctuate as dollar strengthens

Stocks fluctuate as dollar strengthens

Stocks fluctuated Wednesday as good news on manufacturing helped offset a decline in commodities prices.
The market got support from a key economic indicator that signaled growth in the Midwest manufacturing industry for a third straight month. The Chicago Purchasing Managers Index rose to 60 in December from 56.1 in November. The report showed that production and new orders increased and employment improved.
But the market's gains were held back by a stronger dollar and a subsequent drop in energy and material stocks. A jump in the dollar makes commodities, and thus the shares of companies that produce commodities, less attractive to foreign buyers. It also hurts the profits of companies that do business overseas.
Some investors have been buying the dollar in recent weeks on the belief that the U.S. economy is improving and the Federal Reserve will raise interest rates in the next year. That buying interest comes after a months-long slide in the greenback.
Rock-bottom interest rates have encouraged investors this year to move out of cash and into riskier assets such as stocks and commodities that have the potential to earn bigger returns. While a rise in interest rates would be a sign that the economy is on the right track, it could hurt the stock market's advance.
After a 24.7 percent rise in the Standard & Poor's 500 index this year, many investors have closed their books and are making few moves ahead of the start of 2010. Fewer traders in the market can lead to more volatility.
"We've seen oil up and down, the dollar up and down, the market up and down," said Frank Ingarra, co-portfolio manager at Hennessy Funds. "I don't think we'll see a major move one way or the other."
At midday, the Dow Jones industrial average rose 2.73, or 0.03 percent, to 10,548.14. The Standard & Poor's 500 index fell 0.71, or 0.1 percent, to 1,125.48, while the Nasdaq composite index fell 0.81, or 0.04 percent, to 2,287.59.
There were also plenty of reminders Wednesday that companies are still hurting from the blows of the recession.
The government was preparing to extend another multibillion loan to GMAC Financial Services to further stabilize the auto financing company, according to a person familiar with the matter. GMAC, instrumental to the operations of automakers General Motors Co. and Chrysler Group LLC, has already received $12.5 billion in taxpayer money and is 35 percent owned by the federal government. The person, who spoke on condition of anonymity because discussions weren't complete, said the bailout would be in the range of about $3 billion.
Meanwhile, health insurer Aetna Inc. said it expects to take a fourth-quarter charge of up to $65 million to cover the costs of layoffs and consolidations.


Updated : 2020-12-06 02:36 GMT+08:00