Stocks and the dollar gained Monday as investors tried to predict when interest rates might start rising.
Prices for commodities including gold and oil tumbled as the dollar fell. Treasurys, meanwhile, rebounded from a sharp sell-off last week, pushing yields lower.
The dollar rose against other currencies ahead of comments from
Federal Reserve Chairman Ben Bernanke, who will speak before the Economic Club of Washington. Bernanke has insisted that the Fed plans to keep rates low for the foreseeable future, but investors believe that as the economy improves, the central bank might move to raise rates and withdraw some of its support measures. That could reverse the dollar's months-long slide and put a dent in the stock market's advance.
Concerns about the Fed's next move have heightened since Friday, when investors got one of the best indications yet that the economy is strengthening. The Labor Department said employers cut fewer jobs in November than at any time since the
recession began in late 2007 and the unemployment rate dropped to 10% from a 26-year high of 10.2%. High unemployment is considered one of the economy's biggest obstacles to growth.
Stocks rose after the employment report, but gave up most of their early gains as expectations of a possible rate hike grew and the dollar rose. Still, some analysts say the market may have overreacted Friday, and that trading is likely to fall back into its pattern since March of a falling dollar, rising stocks.
"We have a slowly recovering economy," said Robert MacIntosh, chief economist at Eaton Vance Management. "I don't think you need to worry about the Fed changing their mind and raising rates anytime soon."
In early trading, the Dow Jones industrial average rose 44.29, or 0.4%, to 10,433.19. The Standard & Poor's 500 index rose 3.70, or 0.3%, to 1,109.68, while the Nasdaq composite index rose 5.14, or 0.2%, to 2,199.49.
The ICE Futures US dollar index inched up 0.1%. As the dollar strengthened, gold prices dropped $23 to $1,146 an ounce. Oil prices lost 63 cents to $74.84 a barrel on the New York Mercantile Exchange.
Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.47% from 3.48% late Friday.
On Friday, the Dow rose just 23 points, after having been up as much as 151 points earlier in the day. All major stock indexes finished the week higher.
Low interest rates and the resulting decline in the dollar have helped fuel the stock market's nine-month rally. The weak dollar has encouraged investors to buy stocks, commodities and other higher-yielding assets. If the Fed were to raise rates, that would be a good sign that the economy is strengthening. However, investors could curb their buying of stocks and look for ways to make more money elsewhere as rates rise.
A stronger dollar could also hurt companies that produce commodities and have large international operations. Those companies make more money when the dollar is weak and overseas sales are translated into greenbacks. A weaker dollar also makes their goods and services cheaper for foreign buyers.
Stocks are likely to drift as investors await more details from the Fed, which will host its last policy meeting of the year next week. Reports on international trade, business inventories and retail sales are among this week's economic data.
In other trading, the Russell 2000 index of smaller companies rose 1.10, or 0.2%, to 603.89.
About three stocks rose for every two that fell on the
New York Stock Exchange, where volume came to 112.2 million shares.
Overseas, Japan's Nikkei stock average rose 1.5%, while Hong Kong's Hang Seng index slipped 0.8%. Britain's FTSE 100 fell 0.2%, Germany's DAX index fell 0.4%, and France's CAC-40 rose 1.4%.
