Dollar jumps on Europe woes, data; stocks, commodities fall

Tue May 26, 2015 4:33pm EDT
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By Rodrigo Campos

NEW YORK (Reuters) - The U.S. dollar rallied on Tuesday after a string of healthy economic data boosted near-term rate hike prospects, while Greece's financial crisis and signs of growing opposition to austerity in Spain weighed further on the euro.

Stocks and commodities took a knock, as the greenback pushed higher on a solid increase in a gauge of U.S. business investment spending in April.

Other reports showed U.S. consumer confidence improved this month and house prices extended gains in March, which should boost household equity, support consumer spending, and allow the Federal Reserve to move ahead in its plan to raise interest rates later this year.

The mood in Europe was unsettled as voters in Spain punished the ruling Popular Party in local elections after years of austerity policies. Greece, which has warned it may miss a June 5 debt repayment to the International Monetary Fund, also concerned markets.

Stocks fell 1 percent on Wall Street, weighed by the stronger dollar, which gained 1.3 percent against a basket of major currencies .DXY in its largest daily move since July 5, 2013.

The selling in stocks “is a reaction to a slightly stronger dollar as a result of the continuing saga in Europe,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

"The risk-averse move is purely sentiment-driven, not by the economics."

The Dow Jones industrial average .DJI fell 190.48 points, or 1.04 percent, to 18,041.54, the S&P 500 .SPX lost 21.86 points, or 1.03 percent, to 2,104.2 and the Nasdaq Composite .IXIC dropped 56.61 points, or 1.11 percent, to 5,032.75.   Continued...

U.S. one-hundred dollar bills are seen in this photo illustration at a bank in Seoul August 2, 2013. REUTERS/Kim Hong-Ji/Files