U.S. stocks drop as dollar surges, trade row heats up

By Stephen Culp

NEW YORK, (Reuters) - U.S. stocks sold off on Wednesday on concerns over a strengthening dollar, Turkey's currency crisis and global trade tensions, with all three major indexes on track for their worst days since late June.

Shares of materials companies were hit by the strengthening dollar <.DXY>, which reached a 13-month high against key currencies before retreating.

Trade tensions heated up as Turkish President Tayyip Erdogan doubled tariffs on some U.S. imports, and China lodged a complaint against American trade policies with the World Trade Organization.

"It's a familiar pattern, geopolitical pressures versus economic data," said Oliver Pursche, chief market strategist of Bruderman Brothers in New York. "You've got the tariffs coming out of Turkey, ratcheting up potential trade wars, you've had disappointing earnings. ... This is a reasonable reaction to the news."

 

"I don't think that investors should necessarily panic or fear that this is the end of the bull market or that a sharp or prolonged correction lies ahead," Pursche added.

The tariff-vulnerable industrial sector <.SPLRCI> slipped 0.9 percent, with Caterpillar Inc and Boeing Co weighing on the Dow.

Chinese technology giant Tencent Holdings Ltd <0700.HK> reported its first profit decline in almost 13 years, putting pressure on the U.S. tech sector. Technology stocks were the heaviest drag on the S&P 500 and the Nasdaq.

The S&P 500 energy index <.SPNY> dropped 3.6 percent as falling crude prices were exacerbated by an unexpected surge in U.S. stockpiles. The sector was on course for its biggest percentage loss since February 5.

Metals prices fell on the dollar's strength, dragging down the materials sector <.SPLRCM>, which fell 2 percent.

The CBOE Volatility index <.VIX>, a gauge of investor anxiety, was on track to post its biggest one-day jump since June 25.

The Dow Jones Industrial Average <.DJI> fell 269.03 points, or 1.06 percent, to 25,030.89, the S&P 500 <.SPX> lost 30.83 points, or 1.09 percent, to 2,809.13 and the Nasdaq Composite <.IXIC> dropped 121.25 points, or 1.54 percent, to 7,749.65.

Losses were somewhat offset by gains in defensive sectors, such as real estate <.SPLRCR> and utilities <.SPLRCU>.

The second-quarter earnings season is winding down with 460 S&P 500 companies having reported, 79.1 percent of which have beaten analyst expectations, according to Thomson Reuters I/B/E/S.

Shares of Macy's Inc tumbled 13.9 percent as investors took profits on margin worries, even though the department store chain reported better-than-expected same-store sales and raised its full-year guidance.

Tesla Inc stock fell 3.2 percent as the Securities and Exchange Commission sent the company subpoenas regarding Chief Executive Elon Musk's plan to go private, according to Fox Business Network.

Among gainers, Canada-based Canopy Growth soared by 31.3 percent following Corona beer maker Constellation Brands' announcement that it was upping its stake in the cannabis producer.

Chipotle Mexican Grill Inc stock rose by 5.3 percent after Morgan Stanley upgraded the burrito chain to "overweight" from "equal weight."

In economic news, retail sales rose more than expected in July, while farm productivity rose at its fastest rate in over three years.

Declining issues outnumbered advancing ones on the NYSE by a 2.68-to-1 ratio; on Nasdaq, a 3.78-to-1 ratio favored decliners.

The S&P 500 posted 10 new 52-week highs and 11 new lows; the Nasdaq Composite recorded 51 new highs and 135 new lows.

(Reporting by Stephen Culp; editing by Jonathan Oatis)