By Amy Caren Daniel
(Reuters) - U.S. stocks were set for their biggest drop in a week on Thursday as weak earnings reports were compounded by a strong dollar that not only hit metal prices and weighed on miners, but also raised concerns about future corporate revenue growth.
The Federal Reserve's bullish view of the U.S. economy and trade tension pushed the greenback to a one-year high and fanned worries about companies that get a substantial part of their revenue from overseas.
U.S. multinationals are starting to reevaluate their currency hedging strategies, especially after Netflix said earlier this week that a strong dollar would hurt its margins.
"When you see concerns over trade arise, you see small caps and the dollar typically rise and that shows they are seen as safe haven assets," said Shawn Cruz, manager of trader strategy at TD Ameritrade in Chicago, Illinois.
While the large- and mid-cap indexes dipped, the small-cap Russell 2000 index rose 0.42 percent.
The flattening U.S. yield curve, close to levels not seen in 11 years, weighed on banks. JPMorgan, Bank of America and Citigroup all were down more than 1 percent.
The financial sector fell 1.43 percent, the most among the 11 S&P sectors. Weak earnings from insurer Travelers, down 3.1 percent, and American Express, down 2.7 percent, also weighed.
The materials group fell 0.8 percent as metal prices dropped. Copper miner Freeport-McMoRan sank 7.4 percent, the most on the S&P.
Alcoa plunged 12.4 percent after the aluminum producer cut its full-year forecast, blaming tariffs. Steel producer Nucor, whose profit missed estimates, dropped 2 percent.
The markets briefly pared losses after President Donald Trump told CNBC he was "not thrilled" about the Fed's decision to hike interest rates.
At 13:18 a.m. EDT the Dow Jones Industrial Average was down 108.21 points, or 0.43 percent, at 25,091.08, the S&P 500 was down 8.88 points, or 0.32 percent, at 2,806.74 and the Nasdaq Composite was down 23.62 points, or 0.30 percent, at 7,830.82
Still, advancing issues outnumbered decliners by a 1.26-to-1 ratio on the NYSE and by a 1.14-to-1 ratio on the Nasdaq.
Market optimism was also dented by disappointing earnings reports from eBay, slumping 7.8 percent, and Phillip Morris, falling 2.5 percent.
Microsoft was down 0.4 percent ahead of its results after the bell.
Among the bright spots was IBM, which gained 2.8 percent after its results topped estimates.
Comcast gained 2.9 percent after dropping its pursuit of a group of media assets owned by Twenty-First Century Fox, which fell 1.3 percent.
Disney, which has agreed on a deal to buy the Fox assets, rose 2 percent.
The S&P index recorded 19 new 52-week highs and two new lows, while the Nasdaq recorded 81 new highs and 28 new lows.
(Reporting by Amy Caren Daniel and Savio D'Souza in Bengaluru; Editing by Arun Koyyur)
This story has not been edited by Firstpost staff and is generated by auto-feed.
The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .
Updated Date: Jul 20, 2018 00:07:59 IST