Late Wall Street rally flattens euro losses in day of jittery trading
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A late Wall Street rally ended a dive in world stock markets, flattening out losses on Tuesday after tensions in the Korean peninsula and renewed fears over the eurozone's debt woes rattled markets in Europe and Asia.
REUTERS - U.S. stocks and the euro pared deep losses to end mostly flat on Tuesday as investors had second thoughts that a festering euro zone banking crisis will spread worldwide and strangle a reviving economy.
A late-day rally pulled the benchmark S&P 500 into positive territory minutes before the closing bell and wiped out most of the session's losses for the Dow, which closed above the key barrier of 10,000.
U.S. Treasuries gave up most of their gains as equities rebounded from a broad sell-off and the euro staged a rebound from multi-year lows. Earlier, major stock indexes from Asia to Europe closed sharply lower and Wall Street fell more than 3
"It's a selling climax. This has all the looks to me of a capitulation, this being the bottom," said Keith Springer, president of Capital Financial Advisory Services in Sacramento, California.
He said investors had overreacted to fears that a European banking crisis could worsen and fester like the U.S. subprime mortgage crisis that sparked the global recession.
"We know about the banking crisis. Too many people are assuming it is going to turn into something different and be a contagion, and it's not going to be a contagion," Springer said.
The euro earlier fell to an 8-1/2-year low against the yen and neared a four-year trough versus the dollar as investors fretted about the weekend takeover of a small Spanish savings bank, CajaSur.
Traders said small buy orders pushed the euro higher amid thin volumes, triggering stops above $1.2300.
The euro was down 0.02 percent at $1.2348, recovering from losses of more than 1 percent.
Severe stress signs appeared in the credit markets, where dollar interbank lending rates rose as the debt crisis made banks wary of lending to European peers.
Other measures of stress in money markets were at their highest since the financial system emerged from the subprime mortgage crisis a little more than a year ago.
The Dow Jones industrial average closed down 22.82 points, or 0.23 percent, at 10,043.75. The Standard & Poor's 500 Index gained 0.38 points, or 0.04 percent, at 1,074.03. The Nasdaq Composite Index fell 2.60 points, or 0.12 percent, at
The rebound in U.S. stocks dimmed the allure of safe-haven government bonds and erased the day's large price gains.
The benchmark 10-year note cut gains sharply late in the session, last up 7/32 in price. That was a far cry from earlier gains that pushed 10-year yields down as far as 3.06 percent, their lowest since April 2009.
"We're just trading off stocks right now," said Keith Blackwell, U.S. interest rate strategist at RBC Capital Markets in New York.
The equity sell-off and escalating tensions in the Korean peninsula had pushed investors to flock to the yen and dollar for safety.
"Increasingly, market participants are getting scared and fearful that we may have a repeat of late 2008," said Camilla Sutton, senior currency strategist at Scotia Capital in
Toronto, said before markets turned around.
U.S. oil futures slid 2 percent, falling below $70 a barrel as investors fled riskier assets to dollar safety.
U.S. crude fell $1.46, or 2.08 percent, to settle at $68.75 a barrel, trading in a range from $67.15 to $69.91.
ICE Brent crude fell $1.62, or 2.28 percent, to settle $69.55 a barrel.
Dropping from a 2010 peak of $87.15 on May 3, the highest since October 2008, U.S. crude prices could post their biggest monthly loss since the height of the financial crisis.
U.S. gold futures finished with moderate gains in a safe-haven play, as the euro's steep losses to the dollar capped gold's gains.
The June gold contract ended up $4.00 at $1,198.0 an ounce in New York.
The dollar was up against a basket of major currencies, with the U.S. Dollar Index up 0.39 percent at 86.542.
Against the yen, the dollar was up 0.08 percent at 90.20.
The 19-commodity Reuters/Jefferies CRB Index was down 1.26 percent after earlier sliding almost 2 percent to its lowest ebb since Sept. 4, 2009, as oil, copper and sugar traded below, or just above key support levels.