(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, April 24 (Reuters) - Wall Street rallied on
Thursday as financial stocks surged on hopes the worst of a
credit crisis has passed amid signs of economic resilience in
the United States, boosting the dollar and driving down the
price of oil, gold and grains, which eased inflation fears.
The Nasdaq marked its highest finish since early January,
as positive broker views on iPod maker Apple Inc <AAPL.O>
lifted technology shares.
U.S. government debt fell, pushing yields on short-dated
paper to a three-month high, after data showing an unexpectedly
low number of people applying for jobless benefits spurred
doubts the Federal Reserve will keep cutting interest rates.
Oil slumped as gains in the dollar and rising U.S. refinery
production spurred profit-taking, which dragged crude further
from a record peak set earlier in the week near $120 a barrel.
Data that showed U.S. jobless claims fell sharply last week
boosted the dollar by more than 1 percent against a basket of
major currencies, while a key business sentiment measure in
Germany plunged, weighing on the euro.
In the U.S. stock market, investors bet the worst might be
over in the financial sector and that the country's economic
slowdown won't be as deep or prolonged as some have feared.
"The growing consensus is we've seen the worst out of the
financial sector and the economy overall, and people are
willing to take more risk and exposure in equities," said
Michael James, senior trader at regional investment bank
Wedbush Morgan in Los Angeles.
The Dow Jones industrial average <> rose 85.73 points,
or 0.67 percent, at 12,848.95. The Standard & Poor's 500 Index
<.SPX> gained 8.88 points, or 0.64 percent, at 1,388.81. The
Nasdaq Composite Index <> added 23.71 points, or 0.99
percent.
Banking shares led the surge on Wall Street, with the S&P
financial index <.GSPF> rising 3.8 percent. Shares of Merrill
Lynch & Co <MER.N> rose 7 percent to $48.09 after the company
maintained its dividend.
Other financial stocks have been battered recently after
companies bruised by the subprime mortgage meltdown slashed
their dividends.
Also on Thursday, shares of Lehman Brothers <LEH.N> gained
6.2 percent, Citigroup Inc <C.N> added 4.6 percent and Merrill
Lynch <MER.N> rose 7.1 percent.
Shares ofApple jumped 3.7 percent to $168.94.
The chief executive of Merrill Lynch, John Thain, told the
company's annual shareholders meeting that the U.S. economy
will remain difficult in 2008, but "what's happening is we're
shifting -- the credit-related markets are getting better."
European shares also rose, led by Swiss bank Credit Suisse
<CSGN.VX> and drug makers such as Novartis <NOVN.VX>. A
late-morning rise on Wall Street also boosted European shares
just before markets closed.
The FTSEurofirst 300 <> benchmark of top European
shares closed up 0.2 percent at 1,315.78 points after a choppy
session that saw the index drop as much as 1.3 percent.
Demand fell for for the euro after it hit a record above
$1.60 on Tuesday, its highest level since its inception in
1999. Traders and investors had bought the euro betting the
next move by the European Central Bank would be a hike on
benchmark interest rates.
But ECB policy-makers' comments on excess currency
volatility and soft economic data this week damped higher rate
expectations, and triggered a sell-off in the euro.
"The U.S. data today is pretty clearly dollar positive and
we're coming off some weaker European data," said Brian Dolan,
head of research at consultancy Forex.com in Bedminster, New
Jersey.
U.S. jobless claims fell sharply last week to 342,000.
A stronger-than-expected deterioration in corporate
sentiment in Germany and France also raised questions about
whether the ECB would moderate its interest-rate stance.
ECB policy-maker Michael Bonello said he personally
believed it was very difficult to make a case for higher rates,
although the inflation outlook has deteriorated.
The euro <EUR=> fell 1.30 percent to $1.568, and the dollar
rose against major trading-partner currencies, with the U.S.
Dollar Index <.DXY> up 1.05 percent at 72.563.
Against the yen, the dollar <JPY=> rose 0.93 percent at
104.29.
The sliding dollar has devalued U.S. financial assets,
prompting investors to shift cash to commodities that helped
lift crude to an all-time high of $119.90 on Tuesday.
U.S. crude <CLc1> settled down $2.24 to $116.06 per barrel
after falling as low as $114.40. London Brent <LCOc1> settled
$2.12 lower at $114.34 a barrel.
The dollar's bounce against the euro led gold investors to
switch funds from hard metals to other assets.
Spot gold prices <XAU=> fell $17.20, or 1.90 percent, to
$886.00 in late afternoon New York trade.
U.S. Treasury debt prices were lower.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 24/32 to yield 3.83 percent. The 2-year U.S. Treasury note
<US2YT=RR> was down 10/32 to yield 2.40 percent. The 30-year
U.S. Treasury bond <US30YT=RR> was down 28/32 to yield 4.55
percent.
In Asia, Chinese shares jumped after a two-thirds cut in a
securities trading tax, and a modest rebound in the dollar gave
Asian stocks a brief lift ahead of company earnings reports.
The Shanghai Composite Index <>, which had plummeted
more than 50 percent since October, gained 9.3 percent.
Hong Kong's Hang Seng index <> gained 1.6 percent, but
Japan's Nikkei average <> closed down 0.3 percent.
Asian shares outside Japan <.MIAPJ0000PUS> fell 0.3
percent.
(Editing by Leslie Adler)
