By Nick Godt
NEW YORK (MarketWatch) -- U.S. stocks fell Tuesday on heightened
concerns over how China's tightening efforts could impact demand
for commodities while investors awaited the release of Federal
Reserve minutes.
The Dow Jones Industrial Average (DJI) shed 38 points, or 0.4%,
to 10971, in early trading. Intel (INTC) was among the measure's
few gainers, up 0.2% ahead of the chip giant's third-quarter
results due after the close.
The Nasdaq Composite (RIXF) ropped 0.2% to 2396. The Standard
& Poor's 500 index (SPX) lost 0.4% to 1161, with its energy and
materials sectors leading the drop.
Commodities were also weak, with crude-oil futures and gold
futures slipping.
The declines followed a move from China's central bank to
temporarily raise its reserve requirements on six banks as part of
the country's efforts to manage liquidity and cope with
inflationary pressure. The increase, which represents the first
hike in banks' deposit-reserve ratio since May, weighed on the
shares of companies that get a lot of demand from China, especially
in the materials sector.
The dollar strengthened as China's central bank also set a
higher central parity. The U.S. Dollar Index (DXY), tracking the
U.S. currency against a basket of six others, rose 0.2%. Treasurys
rose, pushing the yield on the 10-year note (UST10Y) down to
2.37%.
The rally in Treasurys came ahead of the government's auction of
three-year notes and the release of minutes from the Federal
Reserve's meeting last month. With expectations increasing in
recent weeks for the Fed to unveil more stimulus at its November
meeting to prop up the weak economy, investors will be watching the
minutes closely for any additional signs of the central bank's
assessment of the economy and hints toward its next potential
move.
Investors are also looking ahead to third-quarter earnings
reports, with results from bellwether companies including J.P.
Morgan (JPM), Google (GOOG) and General Electric (GE) set to come
later this week following Intel's report due Tuesday afternoon.
J.P. Morgan fell 0.2% while Google added 0.5% and GE tacked on
0.3%.
Among other stocks in focus, Pfizer (PFE) rose 0.2% after the
drug giant said it will buy King Pharmaceuticals (KG) for $3.6
billion, the latest move by a big drug company to swallow up a
rival as the industry faces patent-expiration woes. King
Pharmaceuticals jumped 39%.
Avon Products (AVP) climbed 7.8% as speculation rose that the
direct seller of beauty products may be a takeover target.