Stocks fall on weak dollar

Foreign investment concerns weigh down market

? Stocks slid Monday after finance ministers from leading industrial nations called for more flexible currency rates, sparking a tumble in the dollar and investor fears of dampened foreign investment. The Dow Jones industrials lost 109 points.

“It’s a combination of profit-taking and weakness in the dollar that is concerning investors,” said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, N.C. “If the dollar continues to fall, there is increasing risk that foreign investors will pull money out of U.S. stocks and bonds.”

The Dow closed down 109.41, or 1.1 percent, to 9,535.41, having risen 1.8 percent in the previous week. It was the biggest one-day drop since Aug. 5, when the blue-chip average declined 149.72 points. The broader market also finished sharply lower.

During the weekend, ministers from the seven largest industrial countries, or G7, said market forces should determine currency exchange rates, statements that many interpreted as support for a weak dollar. The dollar and overseas markets immediately fell on the news.

Foreign countries dislike a weak dollar because it makes their exports less competitive in overseas markets; U.S. investors, meanwhile, worry that foreign investors will stay away from devalued U.S. markets.

Investors have sent stocks higher since mid-March on a spate of largely upbeat economic reports and earnings news. Some analysts wonder whether the market might be due for pullbacks, while others believe stocks have the strength to continue upward on growing investor optimism particularly if third-quarter earnings are strong.

Thomas Scavone, of Van der Moolen Specialities USA, works on the floor of the New York Stock Exchange. Stocks slid Monday after finance ministers from leading industrial nations called for more flexible currency rates, sparking a tumble in the dollar.