NEW YORK (Reuters) - The U.S. dollar surged on Monday to its highest point in 16 months against a basket of currencies and world stocks fell broadly amid concern about political risks in Europe, while a drop in Apple shares added pressure to U.S. equities and tech shares.
FILE PHOTO: A U.S. Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration/File Photo
Major U.S. stock indexes dropped more than 1 percent in initial trading, weighed down by a 4.6 percent slump for index heavyweight Apple, after an iPhone part supplier cut its outlook.
In Europe, fears about a no-deal Brexit and a growing rift over Italy’s budget put pressure on the euro and the pound. The dollar also gained strength as investors built bets on a U.S. Federal Reserve interest rate increase next month.
“Rising global uncertainty and a widening U.S. yield differential with other economies provide support, but an elevated valuation may constrain further gains,” Richard Turnill, global chief investment strategist with BlackRock, wrote in a research note.
The dollar index rose 0.57 percent, with the euro down 0.74 percent to $1.125.
In stocks, the Dow Jones Industrial Average fell 333.07 points, or 1.28 percent, to 25,656.23, the S&P 500 lost 34.97 points, or 1.26 percent, to 2,746.04 and the Nasdaq Composite dropped 172.45 points, or 2.33 percent, to 7,234.45.
Apple shares fell as the main supplier for its Face ID technology, Lumentum Holdings Inc, slashed revenue and profit forecasts, citing reduced orders from a major customer. Lumentum shares tumbled 31.3 percent and shares of other Apple suppliers also dropped.
The S&P 500 technology sector, a main driver of the long U.S. bull run in stocks, tumbled 3.0 percent.
Tech stocks were also weak in Europe as the pan-European STOXX 600 index lost 0.84 percent.
MSCI’s gauge of stocks across the globe shed 1.19 percent, on pace for its third straight session of declines.
Oil prices rose after Saudi Arabia said OPEC and its partners believed demand was softening enough to warrant an output cut of 1 million barrels per day next year.
U.S. crude rose 1.08 percent to $60.84 per barrel and Brent was last at $70.95, up 1.1 percent on the day.
“Oil seems to be causing some jitters right now because they have been volatile,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin.
“It should help energy stocks, yes, but whether or not it helps the overall market, that correlation is not clear a whole lot of times.”
Additional reporting by Richard Leong in New York, Sruthi Shankar in Bangalore and Sujata Rao in London; Editing by Toby Chopra and Nick Zieminski
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