Dollar rallies on Fed rate views; stocks, oil slide

Tue Mar 10, 2015 4:41pm EDT
 
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By Rodrigo Campos

NEW YORK (Reuters) - The U.S. dollar rallied across the board on Tuesday as the prospect of the first rise in U.S. interest rates in almost a decade stoked global volatility, hitting stocks and oil prices.

A resetting of the likely timing of the first Federal Reserve Funds Rate hike since June 2006 was the main driver for Tuesday's selling in equities, analysts said.

"Expectations for the Fed to begin raising rates were being pushed out to the fourth quarter and what we are seeing is a temporary adjustment to the fact they may come as soon as June," said Michael Arone, chief investment strategist for State Street Global Advisors’ U.S. Intermediary Business in Boston.

A Reuters poll after an unexpectedly strong February U.S. jobs report Friday showed many of Wall Street's top firms were now more convinced the Fed will raise rates in June.

"The longer term trend is still in place for stocks and risk assets to do well,” said Arone, citing ample liquidity generated by easing monetary policy in many central banks around the globe.

The benchmark S&P 500 stock index tumbled to close at its lowest in more than a month and in negative territory for the year so far. Concerns over Greece added to the bearish mood on Wall Street, as technical negotiations intended to prevent Greece going bankrupt will start on Wednesday.

The Dow Jones industrial average .DJI fell 332.78 points, or 1.85 percent, to 17,662.94, the S&P 500 .SPX lost 35.27 points, or 1.7 percent, to 2,044.16 and the Nasdaq Composite .IXIC dropped 82.64 points, or 1.67 percent, to 4,859.80.

Nikkei futures NKc1 were down 1.7 percent. An MSCI gauge of stocks across the globe .MIWD00000PUS fell 1.7 percent, the most for any session in more than two months.   Continued...

 
The shadow of the logo of Euro is seen on a U.S. one dollar note in this picture illustration taken in Madrid March 10, 2015. The U.S. dollar hit its highest since 2003 against a basket of currencies on Tuesday as the prospect of the first rise in U.S. interest rates in almost a decade stoked global volatility, hitting stocks, crude and copper.  REUTERS/Sergio Perez