Dollar's post-Fed rally pauses, U.S. stocks end lower

Fri Dec 16, 2016 5:23pm EST
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By Caroline Valetkevitch

NEW YORK (Reuters) - The dollar and U.S. stocks dipped on Friday, taking a breather following this week's big moves after the Federal Reserve signaled a faster pace of U.S. interest rate increases next year.

U.S. Treasury debt yields inched higher, continuing a weeks-long trend. Markets appeared to be adjusting for what is expected to be a quiet holiday period for economic data.

News that a Chinese warship has seized an underwater drone deployed by a U.S. oceanographic vessel in the South China Sea sparked some worries about geopolitical tensions and added to some of the pressure in stocks, Jason Ware, chief investment officer at Albion Financial Group, Salt Lake City, Utah, and other market watchers said.

But he said it has mostly been a day where investors have been digesting recent market moves.

"Whether it's stocks soaring post-election, or bonds selling off equally as violently or the dollar going up, there's been a lot of adjustment in the market in a very short period of time," Ware said.

"Depending on the asset class and which side of the trade you're on, there are a lot of folks saying ... I'm not as comfortable putting on new trades in the same direction until we get a bit of a reprieve."

Bond yields have surged and the dollar rallied to 14-year highs since the Fed on Wednesday raised rates for the first time in a year and signaled three more rate increases in 2017. The dollar has strengthened to almost parity with the euro.

U.S. stocks ended lower and the S&P 500 posted a slight loss for the week, weighed down by a 4.3 percent drop in Oracle shares.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 16, 2016.  REUTERS/Brendan McDermid