NEW YORK -- U.S. stocks posted their biggest loss yesterday in seven weeks as the slumping dollar pushed up Treasury bond yields for a fifth day, fueling a rout in financial issues.
Technology and electric utility issues also fell.
"The reality that the Federal Reserve may well want to raise rates one more time, maybe even at the end of March, just to be sure it's got inflation under control, is beginning to set in," said James Weiss, senior money manager at IDS Equity Advisors, which manages $21 billion in Minneapolis. With "the debacle in the dollar, the Fed may have to raise rates not only for domestic reasons, but partly in defense" of the currency, he said.
The Dow Jones industrial average slid 34.93, to 3,962.63, after falling as much as 51.53, hurt most by falling prices for Walt Disney Co., Procter & Gamble Co. and International Paper Co. Losses were widespread, with more than 16 stocks falling for every five that rose on the New York Stock Exchange, where volume climbed to 355.5 million shares from 298.9 million Monday.
At one point, the Dow industrials fell more than 50 points, triggering the New York Stock Exchange's "uptick" rule for only the second time this year. The rule curbs stock-index arbitrage.
RJR Nabisco Holdings, Telefonos de Mexico SA, Nextel Communications Inc., Microsoft Corp. and Barrick Gold Corp. were the most active issues in composite trading.
Turmoil on currency exchanges also roiled the stock market, traders said. The dollar tumbled to a post-World-War-II low against the Japanese yen, the fourth straight day that has happened, and also to a record low against the German mark.
Among broad market indexes, the Standard & Poor's 500-stock index fell 3.51, to 482.12.
Four rounds of computer-guided orders to sell stocks wiped a combined 48.20 points from the Dow industrials and 5.20 from the S&P; 500, according to Birinyi Associates Inc.
The Nasdaq composite index dropped 6.44, to 791.33, extending Monday's 1.01 decline. Weaker prices for Intel Corp., Amgen Inc., Novell Inc., Apple Computer Inc. and Price/Costco Inc. paced the Nasdaq's decline.
Yields on the Treasury's benchmark 30-year Treasury bond rose as high as 7.66 percent yesterday, their highest since Feb. 13 and up from Monday's 7.59 percent, before closing at 7.62 percent.
Companies sensitive to interest rates and swings in the economy -- especially banks, brokers, financial service companies and utilities -- suffered from the pessimism over interest rates.
In the utilities, Central & South West Corp. dropped 50 cents, to $23.25; Duke Power Co. lost 50 cents, to $37.75; and Northern States Power Co. declined 50 cents, to $43.25.
Gold stocks, a traditional haven when inflation is expected to grow and the dollar weaken, were among the biggest gainers. Newmont Mining Corp. expanded $2.875, to $40.50; Homestake Mining Co. rose $1.50, to $17.25; Barrick Gold added $1.50, to $23.25; and Placer Dome Inc. increased $1.625, to $21.875.
Technology stocks snapped a five-day-long rally, hurt by Hancock Institutional Equity Services' decision to lower its investment opinion on Intel, Lattice Semiconductor Corp. and Texas Instruments Inc. to "hold" from "buy."
Intel dropped $1.875, to $80.375; Texas Instruments slid $1.875, to $86.625; Applied Materials weakened $1.25, to $48; Motorola Inc. slipped 87.5 cents, to $56.75; Integrated Device Technology Inc. fell 75 cents, to $39; and Advanced Micro Devices Inc. fell 62.5 cents, to $33.625.