NEW YORK The U.S. dollar rose to a more than two-week high against a basket of currencies on Friday following strong U.S. economic data, putting pressure on oil prices, which fell after three days of gains.
Wall Street sold off in afternoon trading as oil's decline dragged on energy shares and the benchmark S&P 500 was set to record its third straight week in the red.
U.S. retail sales in April recorded their biggest increase in a year as Americans stepped up purchases of automobiles and a range of other goods, suggesting the economy was regaining momentum.
But countering that optimism were tepid quarterly results from department store operators Nordstrom and J.C. Penney, following weak reports from retailers earlier in the week.
The S&P consumer discretionary sector fell 1.1 percent and consumer staples shares were down 1.3 percent.
"The big question this week is the health of the consumer," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. "Certainly this week, there were enough data points that caused some concern with investors regarding the health of the consumer, and ergo the health of the overall economy."
The Dow Jones industrial average was down 185.35 points, or 1.05 percent, at 17,535.15, the S&P 500 was off 18.89 points, or 0.92 percent, at 2,045.22 and the Nasdaq Composite dropped 24.76 points, or 0.52 percent, at 4,712.57.
The pan-European FTSEurofirst 300 index gained 0.6 percent, rebounding from losses earlier in the session after the U.S. retail sales report.
Germany's economy more than doubled its expansion rate in the first quarter as spending picked up.
MSCI's broad index of global shares fell 0.9 percent, as Asian and emerging markets were weak.
The index, which was on pace for its third straight week of declines, is off more than 1 percent for 2016. Concerns about the global economy persist and investors are responding to diverging policies between the U.S. Federal Reserve and other major central banks.
Along with the positive retail sales report, the University of Michigan said its consumer sentiment index surged 6.8 points to 95.8 early this month, the highest reading since June.
Following the upbeat economic data, the dollar was up 0.5 percent against a basket of currencies.
"In response to this (retail sales) number, markets appear to have concluded that the dollar sell-off through the early part of the year was overdone and consensus is now turning toward a resumption of the Federal Reserve's tightening cycle in the autumn," said Karl Schamotta, head of enterprise risk management at Cambridge Global Payments in Toronto.
A three-day run-up for oil prices came to a halt, hurt by the stronger dollar and investors cashing in on recent gains. A stronger U.S. currency weighs on greenback-denominated commodities such as oil futures.
Losses were cushioned, however, by outages in Nigeria that have slashed output there to the lowest in more than two decades.
Brent crude futures settled down 0.5 percent at $47.83 a barrel. U.S. crude settled 1 percent lower at $46.21, after touching a six-month high on Thursday.
Oil prices have recovered some ground after touching 12-year lows earlier in 2016.
In the U.S. government debt market, the yield curve flattened to the lowest levels in two months after the economic data. Short- and intermediate-dated debt underperformed long-dated bonds after the data, putting the two-year, 10-year yield curve at its flattest since March 9.
Benchmark 10-year notes were last up 16/32 in price to yield 1.7052 percent, down from 1.76 percent late on Thursday.
(Additional reporting by Patrick Graham in London and Gertrude Chavez-Dreyfuss, Devika Krishna Kumar and Karen Brettell in New York; Editing by Bernadette Baum and Dan Grebler)
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Updated Date: May 14, 2016 01:30 AM