* Wall Street closes up slightly despite banking woes
* Hopes for more government bailouts offset early losses
* Oil trades below $35 per barrel
(Adds late U.S. market developments, changes byline)
By John Parry
NEW YORK, Jan 15 (Reuters) - Wall Street shares closed
slightly higher on Thursday on hopes the government might
provide fresh capital to ailing banks to assuage the most
severe financial crisis since the Great Depression.
A steep fall in oil prices to below $35 per barrel, which
could mitigate harsh economic conditions for businesses and
consumers, helped the Dow Jones industrial average recoup after
it dropped below 8,000 points for the first time since the
market's Nov. 21 bear market low.
However, as early steep falls in Citigroup and Bank of
America underscored, investors remained very concerned about
the prospects for some of the biggest U.S. banks.
Safer-haven U.S. government bonds tapped an intermittent
bid from jittery investors, seemingly uncertain whether more
government rescue attempts would be enough to stabilize several
major financial institutions.
Shares of Bank of America <BAC.N>, the largest U.S. bank,
fell 18.4 percent to $8.32. Citigroup <C.N> shares fell as
well, down 15.5 percent to $3.83 a day before the bank was due
to report its quarterly results and a new strategic direction.
Analysts said the need for more financial sector aid
pointed to mounting credit losses as the year-long U.S.
recession deepens.
"I think it's tremendously disappointing that the banks
continue to flounder," said Carl Birkelbach, head of Birkelbach
Management in Chicago. "What's going on here is that the first
batch of the (financial bailout) funds was supposed to put out
the fire, but now it looks like the fire is coming up again."
The Dow Jones industrial average <> ended up 12.35
points, or 0.15 percent, to 8,212.49. The S&P 500 Index <.SPX>
gained 1.12 points, or 0.13 percent, to close at 843.74. The
Nasdaq Composite Index <> added 22.20 points, or 1.49
percent, to finish at 1,511.84.
The dollar rose against the yen <JPY=> but fell against
currencies from some countries with high interest rates as
hopes that the U.S. government would give more money to
troubled banks encouraged investors to edge back into
higher-risk assets such as stocks.
The euro hit a five-week low against the dollar <EUR=> on
Thursday as traders worried the European Central Bank was
moving too slowly to cut interest rates. The European Central
Bank reduced rates by half a percentage point and the
pan-European FTSEurofirst 300 <> ended 1 percent lower.
It was the fourth rate cut in just over three months for
the ECB, triggered by signs the financial crisis is biting hard
into the real economy and inflation threatens to slow further
below the bank's 2 percent ceiling.
Overall, investors said they expect the ECB will slash
rates further following Thursday's move, despite mixed signals
from ECB president Jean-Claude Trichet over the timing of the
next cut.
"Markets are wondering: 'What is Trichet saying? Is he
living in a bubble?'," asked Greg Salvaggio, vice president of
trading at Tempus Consulting in Washington.
"I think it tarnishes his credibility a bit. The British
and the U.S. have thrown the kitchen sink at the problem, but
it seems he's not willing to do what's necessary," he added.
OIL DOWN, TREASURIES FLAT
U.S. crude futures ended more than 5 percent lower on
Thursday on a bleak OPEC global demand forecast, gloomy
domestic economic mews and brimming domestic oil supplies.
On the New York Mercantile Exchange, February crude <CLG9>
settled down $1.88, or 5.04 percent, at $35.40 a barrel.
In the debt market, U.S. Treasury prices traded near flat,
with investors reluctant to buy government debt as benchmark
yields hovered not far above five-decade lows.
The benchmark 10-year Treasury note's price, which moves
inversely to its yield, traded down 1/32 <US10YT=RR> for a
yield of 2.21 percent. The 2-year note <US2YT=RR> traded down
1/32 for a yield of 0.74 percent.
In economic news, job losses in the moribund U.S. economy
mounted last week and manufacturing remained in dire straits
this month. The number of U.S. workers filing new claims for
unemployment benefits rose to a seasonally adjusted 524,000,
underscoring a bleak outlook after the worst year of job cuts
since 1945.
Factory activity in New York state and the Mid-Atlantic
region shrank in January, but the pace of contraction eased a
bit, according to a separate reports that still highlighted a
weak employment outlook in the manufacturing sector.
U.S. producer prices fell for a fifth straight month in
December, government data showed, indicating worries over a
deflationary spiral of falling prices, wages and economic
activity remained a serious concern.
For more see [].
(Additional reporting by Jeremy Gaunt and Ian Chua in London,
Ellis Mnyandu, Wanfeng Zhou, Gertrude Chavez-Dreyfuss, Leah
Schnurr and Chris Reese in New York; Editing by James
Dalgleish)
