NEW YORK (Reuters) - The dollar fell against other major currencies and major stock markets declined on Wednesday as some technology companies slumped and the Federal Reserve’s downbeat assessment of the U.S. economy weighed on sentiment.
Gold hit a record high on speculation that U.S. government stimulus would quicken inflation, while the prospect of more cash flowing through the system boosted stocks and currencies in developing economies that are outperforming Europe and the United States.
The Fed said on Tuesday it stood ready to pump new dollars into the economy — a second round of so-called quantitative easing. The central bank made no policy shift, but investors, understanding the economic situation was eroding, sold stocks to book profits built this month, analysts said.
European and Wall Street shares drifted lower as investors were torn between expectations for Fed help and its message of a faltering recovery. They were also uncertain if Fed moves would be enough to ward off a double-dip recession.
“Investors are realizing things will have to deteriorate first in the economy before the Fed is going to intervene,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
The Dow Jones industrial average .DJI dropped 21.72 points, or 0.20 percent, at 10,739.31 and the Standard & Poor's 500 Index .SPX fell 5.5 points, or 0.48 percent, to 1,134.28. The Nasdaq Composite Index .IXIC slipped 14.80 points, or 0.63 percent, to 2,334.55.
Thursday’s early trading may be weak. The December futures contract that trades in Chicago for the Nikkei 225 stock index slid 105 points to 9,470.
A top Nasdaq loser was Adobe Systems Inc (ADBE.O),which declined 19 percent to $26.67 after the software maker forecast lower-than-expected revenues.
Microsoft Corp (MSFT.O) declined 2.2 percent to $24.61 amid disappointment over the computer software giant’s new quarterly dividend. The company has been under pressure to distribute more of the $37 billion of cash on its balance sheet.
In Europe, the FTSEurofirst 300 index .FTEU3 dropped 1.5 percent, while the MSCI world equity index .MIWD00000PUS rose 0.1 percent, boosted by Asian and other emerging market shares as emerging market stocks .MSCIEF rose 0.6 percent.
The Thomson Reuters global stock index .TRXFLDGLPU declined 0.3 percent.
Investors’ major concern in Europe remained the levels of government debt. Persistent worries about Ireland’s fiscal deficit pushed the spread of its 10-year bond yield over German Bunds to euro lifetime highs of 4.25 percentage points.
Ireland’s borrowing costs jumped at a bond auction but appetite for its bonds as well as Spanish and Greek debt was enough to lift their bond markets.
Despite austerity measures in Ireland, investors demanded higher yields on its bonds because of worries about the cost of bailing out its banks, and the toll that economic troubles could take on tax revenues.
The dollar .DXY fell 0.8 percent to a six-month low against major currencies.
The euro rose as high as $1.3440, its strongest since April, as traders believing in the success of Fed stimulus took on risk. By the close of trading in New York, the euro gained 1.1 percent to $1.3391. Against the Japanese yen, the dollar fell 0.65 percent to 84.54 yen.
The sliding dollar helped gold, which rose to a record of $1,296.10 an ounce before easing to $1291.30, a gain of 0.5 percent. U.S. crude oil reversed gains and fell 0.4 percent to $74.69 a barrel.
“It looks like the hurdle for (quantitative easing) has been lowered, and the Fed is more concerned about the inflation picture,” said Nick Stamenkovic, rate strategist at RIA Capital, who added that the Fed may act as early as November.
Yields on benchmark U.S. Treasuries fell to their lowest levels in three weeks as traders extended a rally from Tuesday when the Fed raised prospects of more quantitative easing. This easing could be in the form of Treasury bond purchases, economists said.
The yield on the benchmark 10-year Treasury note declined 0.03 percentage point to 2.55 percent.
Additional reporting by Joanne Frearson and Amanda Cooper in London, Carmel Crimmins in Dublin and Vivianne Rodrigues in New York; Editing by Kenneth Barry