Stock markets fall; dollar strengthens

NEW YORK - Investors rushed to safety yesterday as concerns about spiraling debt loads and disappointing corporate reports tarnished hopes for an economic recovery.

Stocks tumbled as investors favored safe-haven assets like the dollar and Treasurys. Most major stock indexes fell 1 percent, including the Dow Jones industrial average, which lost 104 points but ended off the day's lows.

An earnings forecast from 3M Co. and a sales report from McDonald's Corp. disappointed investors. The reports weighed on the Dow and overshadowed an increased profit forecast from FedEx Corp., whose results are seen as a gauge for the health of the economy.

Questions about debt levels in places from Greece to the Middle Eastern city-state of Dubai added to investors' concerns. Meanwhile, reports in Britain and Germany signaled that manufacturing remained weak.

The unease drove the dollar and Treasury prices higher. The ICE Futures U.S. dollar index, which tracks the dollar against other major currencies, rose 0.6 percent.

The advancing dollar hit commodities prices, which, in turn, hurt energy and materials producers. A stronger dollar makes commodities more expensive for buyers overseas.

After the huge rally in stocks and commodities this year, investors are looking for clues about where the economy is headed and how best to position their portfolios for next year. Investors are uncertain of how long the environment of low interest rates and a weak dollar that helped fuel the market's rally will last.

The Dow ended down 104.14, or 1 percent, to 10,285.97 after being down as much as 140 points. It was the steepest point and percentage loss for the Dow since Nov. 27 and erased the index's gain for December. Only Verizon Communications rose among the 30 stocks that make up the index.

The broader S&P 500 index fell 11.31, or 1 percent, to 1,091.94, while the Nasdaq composite index fell 16.62, or 0.8 percent, to 2,172.99.

Stocks finished little changed Monday after reassurance from Fed Chairman Ben S. Bernanke that interest rates will remain low to support a recovery failed to galvanize investors.

Bond prices rose, sending yields lower. The yield on the benchmark 10-year Treasury note fell to 3.39 percent from 3.43 percent late Monday.

The slump in stocks and gains in Treasurys came as credit-rating agencies pointed to what they saw as ominous debt loads around the world.

Fitch Ratings lowered Greece's credit rating yesterday because of growing debt. Meanwhile, one agency cut its ratings on six Dubai state-linked companies due to worries about their growing debts.