Reuters
Stocks End Near Flat After Dollar Sinks
Wednesday December 17, 4:34 pm ET
By Vivian Chu
NEW YORK (Reuters) - Stocks ended a choppy session nearly unchanged on
Wednesday after the dollar sank to another record low against the euro and
rekindled fears that currency weakness would curb foreign investment in the
United States.
A weaker dollar raises fears foreign investors, faced with getting less bang
for their buck in dollar-denominated securities, could curb the flow of money
into U.S. assets, which fund the huge U.S. current account deficit.
"The key headline today is the dollar, which just keeps falling to new lows
against the euro, and is one of the bigger threats to the rally," said Joe
Kalinowski, director of research at Puglisi & Co.
A weaker dollar "is good for domestic exporters and manufacturers, as long as
the global economy can absorb the capacity. But it also indicates we're not
getting a lot of foreign investment into the market, which is necessary to
drive the market higher," Kalinowski said.
The Dow Jones industrial average (^DJI - News) ended up 15.70 points, or 0.15
percent, at 10,145.26, its highest finish since May 23, 2002. The broader
Standard & Poor's 500 Index (CBOE:^SPX - News) gained 1.35 points, or 0.13
percent, to 1,076.48, its highest close since May 24, 2002. The
technology-laced Nasdaq Composite Index (NasdaqSC:^IXIC - News) ended off 2.96
points, or 0.15 percent, at 1,921.33.
Traders said the volatility was due to "quadruple witching" this Friday when
four different types of options and futures contracts expire.
The expiration of stock options, index options, index futures and single-stock
futures could spark spikes and dips in the market, as investors either exercise
their positions or roll them forward at the last minute.
"There's a lot of unwinding of derivative positions taking place today. Most
people think (quadruple witching) happens only on Friday, but to me it happens
all week. It contributes to more volatility," said John O'Donoghue, co-head of
listed trading at Credit Suisse First Boston.
Investors were keeping a close eye on the dollar's slide against the euro.
In late New York trade, the euro hit a record $1.2422 (EUR=), its 12th record
high in the last 14 trading sessions. Against the yen, the dollar traded in a
narrow range against the Japanese currency, testing the lows near 107.25 yen
before easing back to 107.40 yen. Low U.S. interest rates and record high
budget and current account deficits have been weighing on the dollar for some
time.
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