US stocks, dollar drop amid worries over government shutdown

NEW YORK: Wall Street stocks pulled back from records and the dollar fell Thursday as anxiety over a possible US government shutdown weighed on investor sentiment.

All three major US indices suffered declines, with the Dow dropping the most after ending above 26,000 for the first time on Wednesday. Analysts also cited lofty equity valuations and profit taking as factors in the dip.

London slid on a rising pound, while Paris finished essentially flat and Tokyo retreated amid profit taking. However, Frankfurt gained 0.7 percent as German semiconductor giant Infineon's shares surged a day after stellar annual results from Dutch computer chip maker ASML.

Despite the mostly lackluster trading results, the underlying mood remained upbeat, traders said, buoyed by bullish Chinese data and strong corporate earnings.

Art Hogan, chief market strategist at Wunderlich Securities, said the bickering among congressional leaders over funding the government beyond Friday was disappointing after Washington successfully mobilized behind tax reform in December.

A government shutdown could be damaging to the economy, especially sectors that depend on federal spending, he said.

"You go from feeling pretty confident about Washington getting things accomplished" to "frustration" at the possibility of a government shutdown, Hogan said.

The risk of a shutdown also weighed on the dollar, which "sold off across the board" after Senate Republican Leader Mitch McConnell's delivered a "warning to plan for a shutdown," said Kathy Lien of BK Asset Management.

"With some eleventh hour scrambling, we still believe the (Republicans) will secure enough votes to keep the government running and if we're right, it should lead to a dollar recovery," Lien said.

"But there will only be a bounce if they reach a deal because right now investors still think that's unlikely."

General Electric had another bad day, falling 3.3 percent following the news Tuesday that it was taking a $6.2 billion charge linked to the insurance business. The conglomerate already was under heavy pressure due to weak performance in key industrial divisions.

Walmart advanced 1.6 percent following an upgrade from Goldman Sachs, which praised the retail giant's strategy and said it was likely to grant a "meaningful" dividend hike due to US tax reform.

Airbus rose 0.7 percent after Emirates Airlines struck a $16-billion deal to buy 36 A-380 superjumbo aircraft, having traded as much as three percent up on the day during the morning session.

The Emirates order throws the A-380 program a lifeline only days after the European manufacturer said it would have to halt production without new orders.

- Key figures around 2200 GMT -

============================

New York - DOW: DOWN 0.4 percent at 26,017.81 (close)

New York - S&P 500: DOWN 0.2 percent at 2,793.03 (close)

New York - Nasdaq: DOWN less than 0.1 percent at 7,296.05 (close)

London - FTSE 100: DOWN 0.3 percent at 7,700.96 points (close)

Frankfurt - DAX 30: UP 0.7 percent at 13,281.43 (close)

Paris - CAC 40: UP less than 0.1 percent at 5,494.83 (close)

EURO STOXX 50: UP 0.1 percent at 3,616.02

Tokyo - Nikkei 225: DOWN 0.4 percent at 23,763.37 (close)

Hong Kong - Hang Seng: UP 0.4 percent at 32,121.94 (close)

Shanghai - Composite: UP 0.9 percent at 3,474.75 (close)

Euro/dollar: UP at $1.2243 from $1.2198 at 2200 GMT

Pound/dollar: UP at $1.3898 from $1.3833

Dollar/yen: DOWN at 111.02 yen from 111.26 yen

Oil - Brent North Sea: DOWN 7 cents at $69.31 per barrel

Oil - West Texas Intermediate: UP 2 cents at $63.95 per barrel