* U.S. stocks falter over Fed's intent
* Dollar up vs euro on Greece's debt jitters
* Treasuries fall on soft auction demand
(Updates with closing prices)
By Manuela Badawy
NEW YORK, Feb 22 (Reuters) - U.S. stocks zig-zagged while
the U.S. dollar rose against the euro on Monday as investors
worried about the sustainability of the economic recovery ahead
of congressional testimony by Federal Reserve Chairman Ben
Bernanke.
Concern about Greece's indebtedness continued to weigh on
the euro and supported the dollar.
The stronger dollar helped drive down copper and gold,
which hit a one-month high earlier, and as risk appetite eased.
Oil closed higher as a French refiner strike and tensions over
Iran's nuclear program outweighed the gains in the dollar.
Bernanke is scheduled to testify on the U.S. central bank's
discount rate hike and monetary policy in general before House
of Representatives and Senate committees on Wednesday and
Thursday, and investors hope he will clarify the Fed's thinking
behind last week's hike in the discount rate.
"The market is still processing a lot of the news on the
rate increase. It does seems like there's a little concern,"
said Dennis Cajigas, senior market strategist at Lind-Waldock,
a retail brokerage firm in Chicago.
"People are still trying to figure out what the intentions
of Bernanke are moving forward," Cajigas said.
U.S. banks shares continued to rise as the Fed's move was
seen as a vote of confidence in the financial system. But
overall, investors worried that the rate increase was the first
move to withdraw an easy money policy that has helped boost
Wall Street, keeping the market's gains in check.
The Fed on Thursday raised the rate at which banks could
borrow from its overnight window to 0.75 percent from 0.50
percent.
The Dow Jones industrial average .DJI closed down 19.04
points, or 0.18 percent, at 10,383.31. The Standard & Poor's
500 Index .SPX fell 1.16 points, or 0.10 percent, at 1,108.01.
The Nasdaq Composite Index .IXIC finished lower 1.84 points,
or 0.08 percent, at 2,242.03.
European equities ended lower after advancing in the
previous five sessions as weaker drug makers and food producers
pressure the market, but analysts said overall momentum
remained positive.
Crude oil prices CLc1 settled above $80 a barrel while
copper prices HGc1 eased as China returned from a week-long
Lunar New Year holiday in a downbeat mood.
U.S. crude had surged 7.7 percent last week, the largest
single-week percentage gain since October. Monday's rise in oil
prices also reflected short-covering ahead of the expiration of
the March U.S. contract.
tensions over Iran's nuclear program.
Gold XAU= fell as well as risk appetite eased and the
dollar firmed. Strength in the U.S. currency tends to pressure
dollar-denominated commodities.
"Markets are set to remain volatile in the week ahead due
to the line-up of economic data and in particular Friday's GDP
reading as players look for sign of continued growth as the Fed
begins to reign in its emergency measures," said James Moore,
analyst at TheBullionDesk.com
The U.S. Commerce Department will release its second
estimate of fourth-quarter gross domestic product.
The FTSEurofirst 300 .FTEU3 index of top European shares
closed 0.28 percent lower at 1,02315 points. The European index
is down 2.0 percent in 2010, partly on worries that China's
moves to slow its economy and a potential Greek debt default
may slow world economic growth.
GlaxoSmithKline shed 2.6 percent, after two U.S. drug
safety reviewers recommended that its diabetes drug Avandia be
pulled from the market.
MSCI's world equity index .MIWD00000PUS rose 0.52 percent.
Emerging market stocks .MSCIEF rose 1.07 percent, while
Shanghai stocks .SSEC finished the first trading day lower
after the Lunar New Year week-long break, as concerns persisted
about further tightening in China's monetary policy.
The U.S. dollar, against major currencies as measured by
the ICE Futures Exchange's dollar index .DXY, fell 0.13 percent
at 80.643.
The euro EUR= fell 0.11 percent at $1.36 as lingering
worries about Greece's public finances capped its gains, while
the dollar JPY= fell 0.51 percent against the yen at 91.12.
Reports that Germany's Finance Ministry had prepared a
bail-out plan for Greece under which countries using the euro
would provide aid worth between 20 billion to 25 billion euros
provided a brief boost to the euro earlier in the trading day.
U.S. Treasury bonds fell as demand for an $8 billion
auction of 30-year TIPS inflation protected bonds was weak.
The U.S. Treasury Department last issued 30-year TIPS in
October 2001. It will sell $44 billion of two-year notes on
Tuesday, $42 billion of five-year notes on Wednesday and $32
billion of seven-year notes on Thursday.
The benchmark 10-year U.S. Treasury note US10YT=RR was down
5/32, with the yield at 3.7936 percent, up from 3.78 percent
late on Friday. The 30-year U.S. Treasury bond US30YT=RR was
down 12/32, with the yield at 4.7279 percent, compared with
4.71 percent late on Friday.
"Obviously, supply this week is going to be the big focus,"
said Marty Mitchell, chief market technician at Stifel Nicolaus
in Baltimore. "We'll keep an eye on stocks as well coming out
of the Federal Reserve's discount rate move last week and the
recent struggle for stocks to stay positive."
(Editing by Leslie Adler)
