US Stocks Decline As Commodities Sink From Rising Dollar

U.S. stocks declined on Monday as a rising dollar pushed down commodities, which in turn weighed on the basic-materials names from which the market has drawn much of its strength lately.

The Dow Jones Industrial Average was off 114 points, or 1.3%, at 8759, marking a slight retreat from last week's 3.1% rise. Aluminum producer Alcoa helped to lead the way lower, trading down 3.7%.

The blue-chip measure also added two new components on Monday, replacing troubled Citigroup and General Motors. Cisco Systems traded down more than 1.5%, but insurer Travelers was less of a drag on the average, trading down 0.2%.

The U.S. Dollar Index was up 1.5%, helping to spur a broad-based commodity decline. The Dow Jones-UBS Commodity Index was off about 1%. Oil futures edged lower, off 29 cents at $68.15 a barrel in New York.

The Nasdaq Composite Index slipped 1.5%. Apple shares slid 2% as investors waited to see if Steve Jobs will appear at the company's developers conference. Palm shares declined 10% after its iPhone rival, the Pre, went on sale over the weekend.

The S&P 500 Index was off 1.1%. All its sectors traded lower, led by a nearly 2% slide in basic materials. The S&P's energy, technology, and consumer-discretionary sectors were close behind, off about 1.5%.

Commodity-related investments have been the main venue lately for investors to express their hope - or in some instances, skepticism - about a possible recovery in the U.S. economy. Monday's calendar included no major releases of economic data, but that issue continued to heavily influence trading.

Among the commodity-related names under pressure were US Steel and DryShips. Freeport McMoran Copper & Gold was down about 3%, Marathon Oil was off about 1% and Potash of Saskatchewan was down more than 2%.

Strategist Jim Paulsen, of Wells Capital Management, said that he remains optimistic about the chances of a second-half rebound in the U.S. But he is increasingly concerned about the recent strength in Treasury prices, which have rallied as some traders bet that inflation will rear its head before consumption and production have made a strong comeback.

"It's really hard to sustain a run in stocks when you have bond yields going up 15 basis points everyday," a trend that makes Treasurys more attractive to investors as an alternative to shares, said Paulsen.

Treasury prices were mixed on Monday. The two-year note was off 3/32, pushing its yield to 1.337%. But the 10-year note was up 6/32 to yield 3.816%..

Overseas, Japan's Nikkei 225 rose 1%. South Korea's Kospi Composite index slipped 0.1% and the Hang Seng Composite Index in Hong Kong closed down 2.3%. Stocks were weaker in Europe.

By Peter A. McKay