NEW YORK - A stronger dollar and disappointing corporate news pushed stocks lower yesterday over concerns that the economy will struggle to recover.

The dollar climbed to a three-month high against the euro, a sign investors were seeking safety. Investor confidence was further sapped as Citigroup Inc. sold stock at a steep discount as part of a plan to repay government loans and a forecast from FedEx Corp. fell short of expectations.

More downbeat news came in on the economy as the government reported an unexpected rise in unemployment claims.

The stock slide yesterday came as the dollar rose, which can cut into profits of U.S. companies that do business abroad. The euro slumped after Standard & Poor's lowered its debt rating on Greece, the latest European country to have credit problems.

The Dow Jones industrial average fell 132.86, or 1.27 percent, to 10,308.26. The broader Standard & Poor's 500 index fell 13.10, or 1.18 percent, to 1,096.08, and the Nasdaq composite index fell 26.86, or 1.22 percent, to 2,180.05.

In corporate news, Citigroup shares fell 25 cents, or 7.25 percent, to $3.20 after the Treasury Department backed out of its plans to sell its 34 percent stake in the company.

The move came after a stock sale drew a tepid response from investors. The bank is trying to repay $20 billion of the $45 billion in government support it received to weather the financial crisis.

Meanwhile, FedEx provided a cautious forecast for the quarter that ends in February after reporting its fiscal second-quarter earnings fell 30 percent. Investors track the company's business because it is seen as a signal about the overall strength of the economy. Shares of the shipping company fell $5.48, or 6.09 percent, to $84.47.

The concerns about debt in Europe and the corporate news brought reminders that the economy is not likely to spring back to life the way it did after downturns earlier in the decade.

"The recovery is likely to be muted," said Jim Baird, partner and chief investment strategist at Plante Moran Financial Advisors. "It's likely to be held back by a consumer that remains in a more delicate spot than would ideally be the case coming out of a recession."

The Russell 2000 index of smaller companies fell 6.96, or 1.14 percent, to 604.25.

Britain's FTSE 100 fell 1.9 percent. Japan's Nikkei stock average fell 0.9 percent.