GLOBAL MARKETS-US stocks, dollar down as Bernanke weighs
Thu Nov 8, 2007 5:23pm EST
(Updates to close of U.S. markets, adds quote)
By Steven C. Johnson
NEW YORK, Nov 8 (Reuters) - U.S. stocks and the dollar fell on Thursday after Federal Reserve Chairman Ben Bernanke said a weak housing market and high oil prices would slow U.S. growth in the fourth quarter and keep it sluggish in early 2008.
Worries about the impact of the credit market's ongoing turmoil on corporate profits pushed safe-haven government bonds higher, and oil prices retreated from record highs near $100 a barrel after Bernanke stirred concern about the health of the economy.
Speaking before a congressional committee, Bernanke told lawmakers that the U.S. economy did not appear headed for a recession and added that inflation was still a concern.
But investors have continued to price in a strong chance that the central bank will cut interest rates next month.
Christopher Low, chief economist at FTN Financial in New York, said investors were a bit at odds on how to interpret the Fed chief's remarks.
"They are pulled in two directions. They are worried about the economy. They are worried about inflation. Bernanke is in a box and it's getting smaller."
On Wall Street, traders pushed stocks lower, though a late recovery in financial shares lifted prices well off session lows touched earlier in the trading session.
The Nasdaq ended the day deep in the red, though, after Cisco Systems Inc (CSCO.O: Quote, Profile, Research) signaled that credit market woes were hurting customer demand, sending the tech bellwether's stock down 9.5 percent.
The Dow Jones industrial average (.DJI: Quote, Profile, Research) shed 33.73 points, or 0.25 percent, to end at 13,266.29. The Standard & Poor's 500 Index (.SPX: Quote, Profile, Research) was down just 0.85 of a point, or 0.06 percent, to finish at 1,474.77. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research) was down 52.76 points, or 1.92 percent, to close at 2,696.00.
The credit crunch of the past three months, stemming from the fallout from the U.S. subprime mortgage crisis, has hit consumer sentiment and threatened to weaken corporate profits and derail growth in the world's largest economy.
DOLLAR DROPS, BONDS RISE
The dollar fell near record lows against the euro on Thursday, weighed down by Bernanke's comments. The euro last traded up 0.2 percent at $1.4670 <EUR=>, near an all-time high of $1.4730 hit on Wednesday.
Against Japan's yen, the dollar traded at 112.33 yen <JPY=>, below 112.80 yen late on Wednesday.
In the fixed-income market, U.S. bonds rose as stocks fell. The benchmark 10-year note <US10YT=RR> was up 10/32 in price for a yield of 4.29 percent, while the 2-year note <US2YT=RR> rose 4/32 to yield 3.48 percent.
OIL PAUSES IN RUN TOWARD $100
U.S. oil (CLc1: Quote, Profile, Research) settled down 91 cents at $95.46 a barrel, after trading as high as $97.70 earlier. Worries over weak U.S. oil demand and falling stock markets have pulled crude lower.
Spot gold <XAU=> fell to $832.10 an ounce from $833 on Wedensday, when it hit $845.50 -- a high last seen in January 1980 and less than $5 below its record high of $850.
COMEX most-active December gold (GCZ7: Quote, Profile, Research), however, rose $4.00 to settle at $837.50 an ounce, below Wednesday's 28-year record at $848.
Gold is up more than 30 percent on the year and has soared since the troubles in the credit markets began. It is seen as an inflation hedge and a safe haven among the turmoil.
EUROPEAN STOCKS SLIP, NIKKEI AT 2-MONTH LOW
Earlier in the session, European markets focused on news surrounding BHP Billiton's (BLT.L: Quote, Profile, Research) takeover approach to rival Rio Tinto (RIO.L: Quote, Profile, Research) in a move that could create a$350-billion-plus mining giant. Rio Tinto, however, rejected the proposal.
Despite Rio Tinto's rejection, the news offered some optimism in a market hit by a fresh series of negative news on the U.S. mortgage and financial industry.
MSCI's main world equity index (.MIWD00000PUS: Quote, Profile, Research) was down 0.7 percent, after hitting a two-week low. The index is up 11 percent since January and not far from last week's record high.
The FTSEurofirst 300 (.FTEU3: Quote, Profile, Research) index of pan-European shares slipped 0.5 percent, or 7.74 points, to 1,535.81.
Japan's benchmark Nikkei average (.N225: Quote, Profile, Research) tumbled to a two-month closing low, ending at 15,771.47, as investors sold shares in response to fears that credit market troubles will spread and as the stronger yen hurt exporters' stocks. For the day, the Nikkei was down 325.11 points, or 2 percent. (Additional reporting by Ellis Mnyandu, Lucia Mutikani, Gertrude Chavez-Dreyfuss, Pedro Nicolaci da Costa, Gene Ramos and Frank Tang; Editing by Jan Paschal)
Reuters journalists are subject to the Reuters Editorial Handbook which requires fair presentation and disclosure of relevant interests.
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