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Dow Cuts Losses as Recession Fears Drive U.S. Dollar to Two-Year Highs

Last Updated September 23, 2020 1:03 PM
Sam Bourgi
Last Updated September 23, 2020 1:03 PM

The Dow and broader U.S. stock market trimmed their losses in late afternoon trading Thursday, as the dollar surged to its highest level in two years over global recession fears.

Dow Cuts Losses; S&P 500, Nasdaq Hold Lower

All of Wall Street’s major indexes ended in negative territory,  mirroring a tepid pre-market for Dow futures. The Dow Jones Industrial Average (DJIA) closed down 79.59 points, or 0.3%, at 26,891.12.

Dow Jones Industrial Average pares most of its losses Thursday afternoon. | Chart: Yahoo Finance

The blue-chip index was off by as much as 167 points earlier in the day.

The broad S&P 500 Index of large-cap stocks fell 0.2% to 2,977.62. Losses were largely concentrated in energy and communication services, with health care and consumer discretionary shares also in the red. On the flip side, utilities and consumer staples traded sharply higher.

Meanwhile, the technology-focused Nasdaq Composite Index fell 0.6% to 8,030.66.

U.S. Dollar Spikes

The U.S. dollar on Thursday notched fresh two-year highs against a basket of currencies, as a confluence of political and economic forces dragged down the euro, yen and British pound.

DXY – the weighted basket of currencies trading against the greenback – reached an intraday high of 99.37. It was last up 0.2% at 99.21, according to Bloomberg data.

DXY Dollar
The U.S. dollar index extends rally to fresh two-year highs. | Chart: Bloomberg

On Wednesday, the dollar surged 0.7%, its largest  percentage gain in three months.

The greenback is reasserting itself as a global reserve currency amid political drama in the United Kingdom and recessionary risks throughout Europe. An impeachment inquiry against President Trump hasn’t deterred investors from increasing their exposure to the greenback or other dollar-denominated assets.