* Stocks slide on worries about health of banking system
* Dollar rebounds, but sees biggest weekly loss since 1985
* Bond prices slip as investors mull impact of Fed program
* Oil falls as recession fears spur concerns about demand
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, March 20 (Reuters) - The bugbears of the
financial crisis returned to haunt markets on Friday, with U.S.
stocks sliding on long-standing worries about the health of the
banking system and oil falling on concerns demand is sluggish.
The U.S. dollar rebounded broadly from a slide sparked by
the Federal Reserve's surprise announcement earlier this week
that it would buy some $1 trillion of government and other debt
in a bid to cut interest rates and revive consumer lending.
U.S. Treasuries slipped on modest profit-taking as the
Fed's purchase plan supported debt even with $98 billion of new
supply due to be auctioned next week. The Treasury market had
its biggest one-day rally in more than 20 years on Wednesday
Stocks fared poorly as analysts' bearish comments hit
General Electric <GE.N> and American Express <AXP.N> fell after
a broker warned of more losses and predicted the credit card
company's dividend would be cut. Both shares fell 6 percent.
Chevron <CVX.N> was among the Dow's biggest drags, dropping
3.6 percent, as oil prices fell because of a stronger dollar
and economic concerns that were fueled by sliding stocks.
"A number of traders are still skeptical about the ability
of this oil market to advance in the face of a recession," said
Peter Beutel, president of Cameron Hanover in New Canaan,
Connecticut.
U.S. crude for April <CLc1>, which expires on Friday,
settled down 55 cents at $51.06 a barrel. May crude <CLK9>
edged up 3 cents to settle at $52.07 a barrel.
London Brent crude <LCOc1> rose 55 cents to settle at
$51.22 a barrel.
In the United States financial shares fell for a second
day, giving up some of their recent sharp gains, after
investors applied for less than 2.5 percent of the $200 billion
the Fed pledged to lend through a program considered key to
reviving ailing banks. For details, see []
"The expectations for TALF were not met by any measure,"
said Michael Pento, senior market strategist at Delta Global
Advisors, in New Jersey, referring to the Fed's Term
Asset-Backed Securities Loan Facility.
The Dow Jones industrial average <> closed down 122.42
points, or 1.65 percent, at 7,278.38. The Standard & Poor's 500
Index <.SPX> shed 15.50 points, or 1.98 percent, to 768.54. The
Nasdaq Composite Index <> lost 26.21 points, or 1.77
percent, to 1,457.27.
Prices of government debt slid on concerns about the impact
of the Fed's massive debt purchase program, which set benchmark
yields on track for their biggest weekly drop this year.
"The Treasury market is still trying to come to grips with
the shock (Fed) statement on Wednesday," said William
O'Donnell, a UBS strategist in Stamford, Connecticut.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
10/32 in price to yield 2.64 percent. The 2-year U.S. Treasury
note <US2YT=RR> fell 1/32 in price to yield 0.88 percent.
The dollar clawed back some of the week's losses, but it
still notched up its biggest weekly plunge against a basket of
currencies <.DXY> since the 1985 Plaza Accord, when major
economies agreed to a formal depreciation of the greenback.
Anticipating an oversupply of dollars, traders sold the
currency broadly. The euro earlier this week hit a two-month
high above $1.37 en route to its biggest daily gain since its
1999 inception.
While the dollar took a hit, a severe global recession will
hurt other countries and their currencies too, said Mike Moran,
senior currency strategist at Standard Chartered Bank in New
York.
"That means we'll see a lower range for the dollar rather
than a total meltdown, which is what the market is getting its
head around today," Moran said.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.96 percent at 83.868. Against
the yen, the dollar <JPY=> rose 1.56 percent at 95.93.
The euro <EUR=> fell 0.87 percent at $1.3544.
Gold edged down as the dollar rebounded against the euro,
prompting profit taking, and a two-day rally in commodity
markets cooled as investors worried about demand.
Copper, soybeans and wheat were among markets that closed
the week up to 8 percent higher on the rally sparked by the
Fed's debt purchase program, which led the dollar to plunge.
U.S. gold futures for April delivery <GCJ9> settled down
$2.60 at $956.20 an ounce in New York.
Earlier in Europe, the pan-European FTSEurofirst 300 index
<> of top shares rose 0.4 percent to 717.88 points.
Bayer <BAYG.DE> jumped 11.3 percent after a U.S. panel put
the company's new blood-clot drug Xarelto on track to win
approval in its largest market [].
Tokyo markets were closed for a public holiday. The MSCI
index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> lost
1.1 percent.
(Reporting by Rodrigo Campos, Steven C. Johnson, Edward
McAllister, Chris Reese and Barani Krishnan in New York, Joanne
Frearson, George Matlock, and Jan Harvey in London; writing by
Herbert Lash, Editing by Chizu Nomiyama)
