* Dow gains, S&P slips as optimism is offset by sell-off
* Dollar falls to 4-month low as risk appetite rises
* Oil edges above $60 on growing optimism about recovery
* U.S. bonds flat to up as weak stocks revive safety bid
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, May 12 (Reuters) - Global stocks faltered and
oil edged higher on Tuesday, rising over $60 a barrel for the
first time in six months, as growing optimism about the world
economy was offset by a sell-off in financial and technology
shares.
Markets were buffeted by cross currents of investor
sentiment. The dollar fell to a four-month low as currency
markets focused on positive news out of Europe, reviving some
appetite for risk. But gold climbed, reflecting a degree of
discomfort over recent rallies in stocks and crude oil.
Crude oil reached $60.08 a barrel, its highest level since
November, on hopes an economic recovery may prompt rising fuel
demand and on buying to hedge against a weaker dollar.
"We've passed the worst in the recession," said Matt
Esteve, a foreign-exchange trader at Tempus Consulting in
Washington. "We're not necessarily moving into growth yet, but
at least the pace of deterioration has slowed."
U.S. Treasury debt prices held firm, maintaining strong
gains from the previous day, as traders settled into a
two-week break from this year's heavy schedule of bond
auctions.
The Dow rebounded from earlier losses to close higher as
investors snapped up energy shares like Exxon Mobil <XOM.N>
and Chevron <CVX.N> and defensive stocks, including healthcare
companies, like Johnson & Johnson <JNJ.N>, Pfizer <PFE.N> and
Merck <MRK.N>. The two sectors provided the biggest boosts to
the Dow.
But technology companies' stocks fell, led by a 4 percent
decline in Apple <AAPL.O>, as investors also fretted over an
apparent lack of incentives to drive the market higher.
"Investors are looking for some type of catalyst and there
isn't a visible one out there that they can invest off of
right now," said Bucky Hellwig, senior vice president at
Morgan Asset Management in Birmingham, Alabama.
"The thawing of the financial markets, the end of the
stress tests were clearly visible catalysts that played out
well."
S&P BRIEFLY DIPS BELOW 900
A pullback in stocks dragged the S&P 500 below the
psychologically important support level of 900 for the first
time in a week. The benchmark closed above 900 but was still
lower for the session.
The Dow Jones industrial average <> closed up 50.34
points, or 0.60 percent, at 8,469.11. But the Standard &
Poor's 500 Index <.SPX> fell 0.89 points, or 0.10 percent, at
908.35. The Nasdaq Composite Index <> slid 15.32 points,
or 0.88 percent, at 1,715.92.
The euro extended gains against the dollar after a member
of the European Central Bank Governing Council said there is
no need for the ECB to expand its asset purchase program to
other sorts of private debt. For more, see [].
Weaker financial, mining and materials stocks outweighed
positive drugmakers' and energy shares in the United States
and Europe, with banking shares among the biggest decliners.
The FTSEurofirst 300 <> index of top European shares
slipped 0.2 percent to close at 852.62.
Although there was a lack of euro-zone data, British
retail sales, housing market surveys and industrial output
bolstered a bullish view of the global economy, encouraging
investors early in Europe to push riskier assets higher.
Oil rose. U.S. crude <CLc1> gained 35 cents to settle at
$58.85 a barrel. Oil trimmed earlier gains after the U.S.
Department of Energy slashed its demand forecast for oil in
2009.
London Brent crude <LCOc1> rose 46 cents, to $57.94 a
barrel.
"There are institutional investors getting in, pushing up
prices," said Jim Ritterbusch, president of Ritterbusch &
Associates in Galena, Illinois. "The dollar is a little weak
and that's also supportive for crude futures."
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 0.69 percent at 82.267, after
earlier hitting a session low at 81.998, its lowest since
early January.
Late in the session, the euro <EUR=> rose 0.4 percent to
$1.3632. Against the yen, the dollar <JPY=> fell 1.17 percent
to 96.39.
The 30-year U.S. Treasury bond <US30YT=RR> rose 10/32 in
price to yield 4.16 percent. The 2-year U.S. Treasury note
<US2YT=RR> was break-even, yielding 0.89 percent.
A GOLD RUSH AS DOLLAR DROPS
Gold ended 1 percent higher as a weaker dollar and a wider
U.S. trade gap prompted fund buying and bolstered the status
of bullion as an alternative investment.
U.S. gold futures for June delivery <GCM9> rose $10.40 to
settle at $923.90 an ounce in New York.
Earlier in Asia, sentiment was hit by data showing Chinese
exports in April fell more steeply than expected from a year
earlier, casting fresh doubt on the prospects for recovery in
the world's third-largest economy. Imports also dropped.
[]
Hopes of a recovery in China on the back of government
spending had lifted Asian equity markets from lows in early
March and added to hopes elsewhere that a global recession had
hit bottom.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> recouped some earlier losses, falling 0.7
percent. Japan's Nikkei average <> slid 1.6 percent.
(Reporting by Leah Schnurr, Edward Krudy, Vivianne Rodrigues,
Wanfeng Zhou, Joshua Schneyer and Pedro Nicolaci da Costa in
New York; Atul Prakash and Jane Merriman in London; Writing by
Herbert Lash; Editing by Jan Paschal)
