* U.S. stocks rebound as lower oil seen helping consumers
* Dollar rallies against yen on Wall Street's rebound
* US government debt falls in face of historic low yields
* Crude oil prices fall to lowest level in four years
(Adds close of U.S. markets, recasts first paragraph)
By Herbert Lash
NEW YORK, Dec 5 (Reuters) - U.S. stocks rebounded sharply
on Friday, shrugging off news of a grim U.S. jobs report that
pushed the price of crude oil below $41 a barrel, as investors
snapped up shares in a market they view as oversold.
The U.S. dollar rallied against the yen as stocks jumped
despite Labor Department data showing 533,000 jobs were cut in
November, the steepest monthly U.S. job losses in 34 years.
Oil dropped more than 6 percent to a four-year low on
concerns a deepening recession will curb energy demand around
the world, and metals prices -- including copper, aluminum,
zinc and lead -- slipped to multiyear lows.
But U.S. stocks reversed losses to close 3 percent or more
higher on hopes lower energy prices will give beleaguered
consumers more spending powder.
The bleak U.S. jobs data earlier had dragged European
stocks down by 4 percent.
U.S. stock markets, however, clawed back from losses of
more than 3 percent in afternoon, with all components but two
of the 30-stock Dow closing higher, up, led by discount
retailer Wal-Mart Stores <WMT.N>. General Motors Corp <GM.N>
and AT&T <T.N> were the sole declining Dow stocks.
"It's all about price action. The market had this horrible
news this morning, it didn't collapse," said Eric Kuby, chief
investment officer at North Star Investment Management Corp in
Chicago.
The fall in crude prices, which had soared to a record over
$147 a barrel in July, also helped lift Wall Street.
Lower oil "means more discretionary spending for consumers,
who are starting to feel better about themselves because they
don't have to drop $100 every time they want to fill up their
tank," said Angel Mata, managing director of listed equity
trading at Stifel Nicolaus Capital Markets in Baltimore.
The Dow Jones industrial average <> closed up 259.18
points, or 3.09 percent, at 8,635.42. The Standard & Poor's 500
Index <.SPX> rose 30.85 points, or 3.65 percent, at 876.07. The
Nasdaq Composite Index <> gained 63.75 points, or 4.41
percent, at 1,509.31.
Stocks earlier had sold off broadly as investors feared the
massive job losses would cause consumers to cut back spending
and cut into corporate earnings.
European stocks slid on fears the U.S. jobs pointed to a
deeper recession that expected, with oil companies and banking
stocks leading the decline.
The pan-European FTSEurofirst 300 <> index closed
down 4 percent at 793.94 points; it has lost about half its
value so far this year.
"When you see such a shocking employment number, you
realize the devastating effect that can have on household
demand," said Henk Potts, equity strategist at Barclays
Stockbrokers in London.
The steep job losses led the price of euro zone government
bond futures higher, pushing the 10-year <EU10YT=RR> cash yield
below 3 percent and near Thursday's trough of 2.939 percent,
the lowest in over 30 years.
But with 10-year euro zone and U.S. yields -- which move in
the opposite direction to their prices -- near historic lows,
analysts said the near term risk was for market momentum to run
out of steam, as a fall in U.S. bonds would suggest.
U.S. Treasury debt prices retreated sharply. The benchmark
10-year U.S. Treasury note <US10YT=RR> fell 46/32 in price to
yield 2.71 percent. The 2-year U.S. Treasury note <US2YT=RR>
fell 8/32 in price to yield 0.93 percent.
The U.S. unemployment rate rose to 6.7 percent in November
-- dramatic news that would normally touch off a flurry of
safe-haven buying of debt.
Investors are reluctant to buy U.S. government debt with
yields hovering off the lowest level in over 50 years.
"We're already at levels we've never seen before. It's just
difficult to continue buying Treasuries at these prices," said
Kim Rupert, managing director of global fixed income analysis
at Action Economics in San Francisco.
November's job losses were the steepest since December
1974, when 602,000 jobs were shed, Labor Department data
showed. They were much worse than forecast by analysts polled
by Reuters who had predicted a reduction of 340,000 jobs.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.25 percent at 86.832. Against
the yen, the dollar <JPY=> gained 0.84 percent at 92.94.
The euro <EUR=> fell 0.31 percent at $1.273.
U.S. crude <CLc1> plunged $2.86 to settle at $40.81 a
barrel, the lowest settlement since December 2004, after
touching $40.50 earlier in the session. London's Brent crude
<LCOc1> settled down $2.54 at $39.74 a barrel.
Many dealers and analysts expect oil prices to soon test
the psychologically important $40 level as evidence mounts of a
significant decline in oil demand in developed economies.
Gold fell sharply to close just above $750 an ounce as the
U.S. job report led to a higher dollar.
U.S. gold futures for February delivery <GCG9> settled down
$13.30 at $752.20 an ounce in New York.
Asian shares edged higher overnight, with the MSCI index of
Asian shares outside Japan <.MIAPJ0000PUS> rising 0.2 percent,
but trimmed gains to trade lower after the U.S. employment
report. The Nikkei average <> fell 0.1 percent.
(Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss and
Chris Reese in New York and Rebekah Curtis, Christopher Johnson
and Ian Chua in London; writing by Herbert Lash; Editing by
Leslie Adler)
