The stock market lost ground for a third straight day as investors grew uneasy about a rising dollar and spiking demand for the safest government debt.
A disappointing earnings report from computer maker Dell Inc. weighed on technology shares Friday and hurt the Nasdaq composite index.
Demand for safe havens rose following Dell's report and as European Central Bank President Jean-Claude Trichet said the ECB plans to start reining in some of its stimulus programs. Hiking borrowing rates could help keep inflation in check but could also slow improvement in the economy.
Investors seeking safety pushed into the dollar. A strengthening dollar curtails foreign demand for commodities, which are traded in dollars. It also can depress U.S. exports, which become more expensive as the dollar rises.
The advancing dollar hurt energy and materials stocks, which are closely tied to commodities.
Investors looked for stable government investments. The yield on the three-month T-bill, which moves opposite its price, fell to 0.01 percent from 0.02 percent late Thursday. It stands near its lowest level of the year, which it hit Thursday. Yields briefly turned negative Thursday as investors seeking to pad their portfolios with safe investments before the end of the year were willing to accept losses.
"Investors seem to need a constant reassurance with where we are in the economic recovery," said Brett D'Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego. "We just haven't gotten it in the past few days."
In early afternoon trading, the Dow Jones industrial average fell 42.47, or 0.4 percent, to 10,289.97. The Dow fell 105 points, or 1 percent, in the past two days.
The broader Standard & Poor's 500 index fell 6.28, or 0.6 percent, to 1,088.62, while the Nasdaq fell 18.64, or 0.9 percent, to 2,140.40.
The ICE Futures US dollar index, which measures the dollar against other major currencies, rose 0.5 percent.
Demand for longer-term Treasurys fell, pushing yields higher. The yield on the benchmark 10-year note fell to 3.36 percent from 3.34 percent.
D'Arcy said he expected stocks would slide Friday because of economic numbers that arrived during the week.
Reports Wednesday and Thursday showing a drop in housing starts and a jump in mortgage delinquencies upended an advance that had been all but unbroken in November. Those figures brought worries that an economic recovery will be slow and bumpy.
Concerns about the pace of a recovery have dogged the market's eight-month rally but with the nation's unemployment rate now above 10 percent for the first time in 26 years and new worries about housing, some analysts say investors have raced too far ahead of a recovery in the economy.
Even if stocks can manage to climb in the final six weeks of the year, some traders are worried that there will be little to propel the market higher in 2010 if worries about jobs, housing and consumers don't ease.
Investors got the type of downcast news from Dell that suggests a recovery could be uneven. The company said sales of its computers to big businesses remain sluggish. Its quarterly revenue and profit missed analysts' expectations. The stock fell $1.51, or 9.5 percent, to $14.36.
Meanwhile, D.R. Horton Inc.'s quarterly loss narrowed as the homebuilder booked smaller write-downs on its inventory. Even as its losses shrank, revenue fell 42 percent as the housing market remained unsteady. The stock fell $1.89, or 15.4 percent, to $10.36.
Energy companies logged some of the biggest drops as crude oil fell 76 cents to $76.70 per barrel on the New York Mercantile Exchange as the dollar rose. Gold rose.
Independent oil and gas producer Devon Energy Corp. fell $2.05, or 3 percent, to $67.12.
Three stocks fell for every one that rose on the
New York Stock Exchange, where volume came to 662.2 million shares compared with 547.1 million shares traded at the same point Thursday.
The Russell 2000 index of smaller companies fell 4.58, or 0.8 percent, to 581.10.
Overseas, Britain's FTSE 100 fell 0.3 percent, Germany's DAX index lost 0.7 percent, and France's CAC-40 dropped 0.8 percent. Japan's Nikkei stock average fell 0.5 percent.
