* U.S. stocks gain on data, but banks limit rally
* Dollar, yen fall after U.S. data boosts risk appetite
* Oil rises on strong U.S., China manufacturing data
* Bonds fall as improving data erodes safe-haven appeal
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, Nov 2 (Reuters) - Crude oil rose and the dollar
fell on Monday on strong worldwide factory data and a surprise
jump in U.S. pending home sales, but U.S. stocks see-sawed
before ending higher after a sell-off in banking shares.
The data boosted risk appetite as it pointed to steady
improvement in the economy, but critical remarks by a Federal
Reserve official caused investors to sell financial shares and
snuff an early rally on Wall Street. For details, see:
[]
The major U.S. equity indexes had risen about 1 percent as
the data and strong results from Ford Motor Co <F.N> spurred
broad-based gains and soothed worries over the strength of the
recovery. []
But Jon Greenlee, associate director of the Federal
Reserve's Division of Banking Supervision and Regulation, said
U.S. banks are at risk of sizable new loan losses, particularly
on commercial property.
Some banks may not have sufficient capital to fully cushion
against setbacks, Greenlee said in testimony before a
congressional subcommittee meeting in Atlanta.
Questions about whether the seven-month rally in U.S.
equities has run out of steam also weighed on sentiment. The
Fed is set to begin a two-day policy meeting on Tuesday.
"The market has turned from buying on dips to selling on
rallies," said Terry Morris, senior vice president and senior
equity manager for National Penn Investors Trust Co in Reading,
Pennsylvania.
The Dow Jones industrial average <> was up 76.71
points, or 0.79 percent, at 9,789.44. The Standard & Poor's 500
Index <.SPX> was up 6.69 points, or 0.65 percent, at 1,042.88.
The Nasdaq Composite Index <> was up 4.09 points, or 0.20
percent, at 2,049.20.
The economic data gave the oil markets a shot in the arm,
said Phil Flynn, an analyst at PFGBest Research in Chicago.
[]
"Oil futures are still trading in the recent range here,
but the market is sensing that if manufacturing continues to be
strong that will translate into higher demand for oil," Flynn
said.
U.S. crude <CLc1> rose $1.13 to settle at $78.13 a barrel.
In London, Brent crude <LCOc1> settled $1.35 higher at $76.55 a
barrel.
Commodity prices mostly rose, lifting commodity-linked
currencies such as the Australian and Canadian dollars.
"The pattern in which stocks and the euro are correlated is
intact. As stocks rise, so does the euro," said Marc Chandler,
global head of FX strategy at Brown Brothers Harriman in New
York.
"But I don't think we're out of this consolidation and
correction in stocks, and even in the euro. I'm not convinced
that the downside correction in the euro is over," he said.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.10 percent at 76.223.
The euro <EUR=> was up 0.36 percent at $1.4768, and against
the yen, the dollar <JPY=> was up 0.27 percent at 90.32.
U.S. December gold futures <GCZ9> settled up $13.60 at
$1,054 an ounce in New York.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 11/32 in price to yield 3.43 percent.
Earlier in Asia, worries about the U.S. financial sector
resurfaced after CIT Group Inc <CIT.N>, the lender to small and
mid-sized U.S. companies, filed for bankruptcy.
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> fell 1 percent to touch a one-month low.
Japan's Nikkei average <> dropped 2.3 percent, mirroring
the 2.8 percent slide in the U.S. S&P 500 <.SPX> on Friday.
(Reporting by Chuck Mikolajczak, Gertrude Chavez-Dreyfuss,
Matthew Robinson and Ellen Freilich in New York; Emelia
Sithole-Matarise and Joanne Frearson in London; writing by
Herbert Lash; Editing by Leslie Adler)
