* U.S. stocks slip, investors fret about Fed bond program
* Dollar slips further after biggest 1-day drop since 1985
* Bonds prices also slide after biggest rise since 1987
* Oil shoots above $51 barrel as dollar spurs commodities
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, March 19 (Reuters) - Oil jumped more than 7.0
percent on Thursday and the U.S. dollar slid further on fears
that the Federal Reserve's plan to pump an additional $1
trillion into the U.S. economy will ramp up inflation in the
future.
U.S. stocks slipped as investors took profits in financials
that soared after the Fed announced on Wednesday its latest
move to end the deepest U.S. recession since the early 1980s.
The dollar fell for a second straight session and the euro
soared above $1.37 as investors feared the massive purchase of
U.S. Treasury debt will debase the world's reserve currency.
"We are facing what I think is one of the most aggressive
inflationary periods in our country's history," said Zachary
Oxman, senior trader with TrendMax Futures in Encinitas,
California.
"The minute these (commodity) markets sniff inflation,
things are going to go through the roof and the dollar is going
to get whacked," he said.
Copper soared to a 4-1/2-month high as the dollar's slide
and heightened expectations of inflation because of the Fed
plan drove bullish sentiment in commodity markets.
Gold futures jumped almost 8.0 percent to their highest
level in nearly three weeks as the Fed's move highlighted
gold's value as an inflation hedge.
"It also points out that, if the Fed took such dramatic
moves, there are still some serious problems out there, and it
certainly renewed the flight to safety buying," said Bill
O'Neill, managing partner of LOGIC Advisors in New York.
Copper hit a session peak of $4,020 a tonne in London
markets, its highest level since early November, and crude oil
soared above $51 a barrel, a level last seen in late November.
Grain prices also surged in Chicago markets, with wheat
rising almost 5 percent, rice climbing nearly 4 percent and soy
up about 3 percent, according to May contracts.
"I don't think the action is over yet in the dollar, but
any further declines will definitely add support to our
agriculture markets," said Terry Reilly, a grains analyst with
Citigroup in Chicago.
U.S. crude <CLc1> settled up $3.47 at $51.61 a barrel, the
highest settlement since Nov. 28. London Brent <LCOc1> rose
$3.01 settle at $50.67 a barrel.
The euro <EUR=> rose 1.07 percent at $1.365, while against
the yen, the dollar <JPY=> fell 1.28 percent at 94.62.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 1.19 percent at 83.19.
Ngozi Okonjo-Iweala, a World Bank managing director, said
markets were getting ahead of themselves but the Fed's surprise
move was warranted because of the financial crisis.
"I'm not saying there should be no concern. You need to
keep a bit of an eye on that. But I don't think we're there
yet," Okonjo-Iweala told the Reuters Food and Agriculture
Summit in Washington. "Inflation worries are a little bit down
the road."
On Wall Street, financial shares led the benchmark S&P
lower after the sharp run-up the day before. JPMorgan <JPM.N>
fell 8 percent and the KBW Bank index <.BKX>, up 11 percent on
Wednesday, slid 9.1 percent.
The weaker dollar helped boost shares in the energy and
materials sectors, cushioning the market's slide. Alcoa Inc
<AA.N> soared almost 17 percent, Caterpillar Inc <CAT.N> rose
3.4 percent and Chevron <CVX.N> added 0.8 percent.
The Dow Jones industrial average <> closed down 85.78
points, or 1.15 percent, at 7,400.80. The Standard & Poor's 500
Index <.SPX> fell 10.31 points, or 1.30 percent, at 784.04. The
Nasdaq Composite Index <> shed 7.74 points, or 0.52
percent, at 1,483.48.
Profit-taking trimmed prices of U.S. Treasuries after the
Fed's move sent yields down almost half a percentage point on
Wednesday in the biggest single-day drop since the October 1987
crash on Wall Street.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
15/32 in price to yield 2.60 percent. The 2-year U.S. Treasury
note <US2YT=RR> fell 3/32 in price to yield 0.87 percent.
U.S. gold futures for April delivery <GCJ9> settled up
$69.70 at $958.80 an ounce in New York.
European shares closed higher, with banks and commodities
taking the lead, but gains were capped as investors fretted
about the implications of the Fed plan.
The pan-European FTSEurofirst 300 <> index of top
shares closed up 0.6 percent at 715.17 points.
(Reporting by Leah Schnurr, Matthew Robinson, Steven C.
Johnson, Chris Reese in New York and Sam Nelson in Chicago;
writing by Herbert Lash; Editing by Leslie Adler)
