* Wall Street falls as U.S. banks sell stock to raise cash
* Dollar rebounds from four-month low on safe-haven appeal
* Government debt rebounds as weak stocks spur safety bids
* Oil eases slightly on profit-taking, dollar firmness
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, May 11 (Reuters) - U.S. stocks fell and oil
slipped on Monday as investors locked in profits after a strong
run-up in riskier assets and major U.S. banks announced large
stock offerings to repay government bailouts.
U.S. Treasuries and euro zone government debt rose as the
outlook for stocks weakened. The Federal Reserve bought $3.51
billion of longer-dated bonds and the Bank of England bought
3.4 billion pounds ($5.16 billion) of long-dated gilts.
Oil fell marginally, pressured by weaker equity markets and
a firmer dollar, helping to cut crude's price from six-month
highs reached last Friday.
The dollar rose, rebounding from a four-month low, as
declining stock prices boosted the U.S. currency's safe-haven
appeal and investors bought the greenback after a sharp
sell-off last week.
But interbank rates in London continued to fall as the
overall outlook in the financial sector eases.
With government stress tests on big U.S. banks out of the
way, investors sold banking shares to take profit on both sides
of the Atlantic.
U.S. Bancorp <USB.N>, Capital One <COF.N> and BB&T Corp
<BBT.N> became the latest American banks to seek additional
capital by announcing stock offerings. Investors sold bank
stocks to book profits ahead of the dilutive effects of the
offerings.
U.S. Bancorp lost 9.9 percent, Capital One fell 13.5
percent and BB&T Corp shed 7.6 percent.
"Banks are going to need to raise capital, that's weighing
on the market. We climbed a wall of worry, bought the rumor,
and now we're selling the news," said Marc Pado, market
strategist at Cantor Fitzgerald in San Francisco.
The Dow Jones industrial average <> closed down 155.88
points, or 1.82 percent, at 8,418.77. The Standard & Poor's 500
Index <.SPX> shed 19.99 points, or 2.15 percent, at 909.24. The
Nasdaq Composite Index <> lost 7.76 points, or 0.45
percent, at 1,731.24.
JPMorgan Chase & Co <JPM.N> fell 8 percent, and Bank of
America Corp <BAC.N> slipped 8.7 percent after it said last
week it would sell 1.25 billion shares to help meet what the
U.S. government deemed was a $33.9 billion capital shortfall.
In Europe, Standard Chartered <STAN.L> fell 6.8 percent,
Societe Generale <SOGN.PA> slid 3 percent and Nordea Bank
<NDA.ST> lost 4.8 percent.
Nasdaq losses were limited by reassuring comments from
German business software maker SAP AG <SAPG.DE><SAP.N>, whose
chief executive said the company expects "glimmers of hope" in
the global economy in the second half of 2009.
Shares of SAP rival Oracle Corp <ORCL.O> rose 1.3 percent,
among the top boosts to the Nasdaq, while SAP gained 2.85
percent in European trading.
Since reaching a 12-year low in early March, the Dow Jones
industrial average is up about 32 percent and the S&P 500 about
39 percent.
The dollar rose and the yen posted broad gains. The U.S.
and Japanese currencies often gain when risk aversion rises as
they are perceived as safer places in times of stress.
"The market was getting a little ahead of itself last
week," said Vassili Serebriakov, a currency strategist at Wells
Fargo Bank in New York.
The recent rally in equities, commodities and
commodity-driven currencies was based more on improved market
sentiment rather than any fundamental data, Serebriakov said.
"Given the ongoing difficulties in the global economy, the
recovery in the fundamentals will be much slower than the
recovery in market sentiment," he said.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.40 percent at 82.775. Against
the yen, the dollar <JPY=> was down 1.21 percent at 97.36.
The euro <EUR=> fell 0.48 percent at $1.3581.
In government debt markets, some investors took the
opportunity to snap up bargains after a sell-off in the bond
market last week that left the market oversold.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
33/32 in price to yield 3.17 percent. The 30-year U.S. Treasury
bond <US30YT=RR> gained 50/32 in price to yield 4.18 percent.
Dollar funding costs among banks eased with the three-month
rate sliding to a fresh low as hopes the embattled financial
sector may be recovering continued to help mend the interbank
money market.
The three-month London interbank offered rate, or Libor,
for dollars <USD3MFSR=> touched a record low of 0.92 percent,
while equivalent euro and sterling rates also hit new troughs
of 1.29625 percent and 1.41188 percent, respectively.
The premium that Libor rates trade over a risk-free
benchmark, the Overnight Index Swap rate (OIS), all eased on
Monday, with the three-month dollar/OIS spread tightening to 73
basis points at one stage -- the narrowest since late July.
U.S. crude <CLc1> fell 13 cents to settle at $58.50 a
barrel. In London, Brent crude <LCOc1> settled down 66 cents at
$57.48 a barrel.
"There was some late speculative buying that kept losses at
a minimum today and that shows you that despite the oil markets
earlier following equities, the oil price strength we've seen
lately is still intact," said Gene Mcgillian, analyst at
Tradition Energy in Stamford, Connecticut.
Gold prices dropped in quiet trade as a bounce in the
dollar prompted investors to take profits.
U.S. gold futures for June delivery <GCM9> settled down
$1.40 at $913.50 an ounce in New York.
Asian shares rose to a seven-month high, with MSCI's index
of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> up 0.7
percent. The index was off 0.6 percent after U.S. markets.
Japan's Nikkei average <> rose 0.2 percent.
(Reporting by Ellis Mnyandu, Vivianne Rodrigues, Burton
Frierson, Edward McAllister and Frank Tang in New York and
Joanne Frearson, Emelia Sithole-Matarise and Ian Chua in
London; writing by Herbert Lash; Editing by Leslie Adler)
