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 A recent string of improving U.S. economic data has raised
expectations the Fed may act sooner to raise interest rates, a move
most investors expect will begin next year.
U.S. retail sales data on Friday that showed spending rose broadly
in August added to those expectations, while consumer sentiment hit
a 14-month high.
"The general message on the economy is that it’s improving, but we
still have a lot of slack to take up," said Scott Brown, chief
economist at Raymond James in St. Petersburg, Florida.
U.S. Treasury debt yields also rose on Friday, with benchmark yields
posting their biggest weekly increase in over a year, helping to
make the dollar a more attractive investment.
The benchmark 10-year U.S. Treasury note was down 20/32, the yield
at 2.605 percent.
As currency markets made sizable moves this week, major stock
markets worldwide pulled back from recent peaks on profit-taking and
jitters about the effect of higher U.S. borrowing costs on the
global economy.
U.S. stocks fell as energy shares extended their recent slide, while
rising bond yields drove down high-dividend-paying shares. Major
U.S. indexes finished lower after five straight weeks of gains.
"What's been creeping into investors' minds is the inevitability of
the Fed raising rates and whether they're going to do it sooner
rather than later," said Bruce Zaro, chief technical strategist,
Delta Global Asset Management in Boston.
The Dow Jones industrial average .DJI fell 61.49 points, or 0.36
percent, to 16,987.51, the S&P 500 .SPX lost 11.91 points, or 0.6
percent, to 1,985.54 and the Nasdaq Composite .IXIC dropped 24.21
points, or 0.53 percent, to 4,567.60.
For the week, the Dow was down 0.9 percent, the S&P 500 was down 1.1
percent and the Nasdaq was down 0.3 percent.
The S&P energy index <.SPNY> fell 1.5 percent and was among the
day's worst-performing sectors as U.S. oil prices shed 0.6 percent.
The energy group was down 3.7 percent for the week.
Shares of Exxon Mobil Corp <XOM.N> retreated 1.3 percent on the day,
while ConocoPhillips <COP.N> fell 1.2 percent. Crude oil prices fell
on pressure from weak demand, ample supplies and the strong dollar.
U.K. equities also finished slightly lower, with investors
refraining from making strong bets on stocks before Scotland's
referendum on independence.
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The FTSEurofirst 300 <.FTEU3> index of top European shares ended 0.1
percent lower at 1,382.98.
Germany's DAX <.GDAXI>, closed down 0.4 percent after the United
States and the European Union tightened sanctions on Russia over its
intervention in Ukraine.
Germany imports a significant amount of gas from Russia and sold
Russia about 36 billion euros ($47 billion) of goods last year,
almost a third of the EU's total. Some 6,200 German firms are in
Russia, with 20 billion euros of investment.
The MSCI world equity index <.MIWD00000PUS>, which tracks shares in
45 nations, slipped 0.46 percent to 426.17.
Gold prices hit 7-1/2 month lows on a strengthening dollar. Spot
gold fell 1 percent to $1,228.13 an ounce.
"We do seem to have reached a tipping point both on expectations for
(U.S.) interest rate rises next year and the dollar," said Simon
Derrick, head of currency research at Bank of New York Mellon in
London.
The dollar index<.DXY>, a measure of the greenback's value against a
basket of six major currencies, was down 0.15 percent for the day at
84.17, but still on course for its longest streak of weekly gains
since the first quarter of 1997.
A 2.0 percent rise on the week also took the U.S. currency to a
six-year high of 107.39 yen. The euro stabilized after four weeks of
losses, ending around $1.2964.
The British pound recovered a little ground after the latest polls
showed next Thursday's Scottish referendum vote as too close to
call. Sterling ended around $1.6266, above a 10-month low of $1.6051
set on Wednesday.
(Reporting by Richard Leong; Additional reporting by Patrick Graham
in London; Editing by Dan Grebler)
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