* Wall Street slips on speculation of end of tax credit
* U.S. dollar rises as stocks, commodities fall
* U.S. Treasury prices sag on supply, rate-hike worries
* Crude oil slips almost 3 percent as dollar gains
(Updates with U.S. markets, changes byline, dateline; previous
LONDON)
By Herbert Lash
NEW YORK, Oct 26 (Reuters) - The dollar rallied from
14-month lows versus the euro on Monday as global stocks and
crude oil reversed course and fell amid concerns about an
economic recovery.
Speculation that a credit for first-time U.S. homebuyers
will be phased out helped lift the dollar while investors
scaled back commodity holdings following a rally for raw
goods.
Gold prices edged lower as the dollar bounced off 14-month
lows against the euro, with weak physical demand for the
precious metal also weighing. For details, see [].
It was a turnaround for the dollar, which struggled earlier
in the wake of a report saying China should increase its
holdings of euros and yen in its foreign reserves.
The euro fell to session lows just below $1.49 <EUR=EBS> on
the EBS platform after earlier hitting a 14-month high at
$1.5064.
Crude oil slumped almost 3 percent, toward $78 a barrel,
after trading as high as $81.58.
"There is selling spread out among a broad array of
commodities," said analyst Brad Samples of Summit Energy in
Louisville, Kentucky. "The dollar is now up, after earlier
being down, and that is helping to point crude oil lower."
Analysts also said investors felt uncomfortable pushing the
euro higher given the huge amount of bearish trades on the
dollar, which suggests a near-term recovery in the U.S.
currency is on the horizon.
Data earlier in the day unexpectedly revealed German
consumer sentiment declined for the first time in just over a
year going into November. []
The ISI Group said that there could be an agreement to
phase out, rather than extend, the home buyer tax credit,
according to Art Hogan, equity strategist at Jefferies & Co in
Boston.
Several traders attributed the drop in U.S. stocks to ISI's
research note.
"Anything that stops the printing press is going to help
the dollar," said Joe Saluzzi, co-manager of trading at Themis
Trading in Chatham, New Jersey. But "any time you pull away a
bailout, the market doesn't like it," he said.
U.S. stocks pared losses after U.S. Sen. Bill Nelson, a
Florida Democrat and member of the Senate Finance Committee,
told reporters that he expects the U.S. Senate to extend the
$8,000 tax credit "later this week." []
However, Nelson said that the Senate's action "would be an
extension for a limited period of time" because the tax credit
expires on Nov. 1.
Shorty after 1 p.m. (1700 GMT), the Dow Jones industrial
average <> was down 96.21 points, or 0.96 percent, at
9,875.97. The Standard & Poor's 500 Index <.SPX> was down 10.55
points, or 0.98 percent, at 1,069.05. The Nasdaq Composite
Index <> was down 11.43 points, or 0.53 percent, at
2,143.04.
The energy and materials sectors, which had helped lift
major U.S. indexes more than 1 percent earlier, reversed course
as U.S. crude futures <CLc1> fell below $80 a barrel while the
ICE Futures dollar index <.DXY> gained 0.7 percent.
In Europe, heavyweight energy shares led shares to
surrender early gains after crude oil fell and the dollar
rebounded. []
The FTSEurofirst 300 <> index of top European shares
closed down 1.2 percent at 996.50.
U.S. Treasury debt prices fell amid worries about this
week's record auction of $123 billion in bonds and speculation
the Federal Reserve is paving the way to raise interest rates
sooner than expected. []
The early rally on Wall Street added to bond selling, which
pushed benchmark yields to their highest levels since August.
Encouraging company results boosted optimism over the pace of
recovery and curbed safety bids for low-risk government debt.
Short-term interest rates futures implied traders are
pricing in the chances of the U.S. central bank raising rates
in the second quarter of 2010, rather than the third quarter.
Ten-year euro zone government bond prices recovered from a
one-month low as Wall Street shares reversed initial gains to
end the session little changed on the day. []
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
15/32 in price to yield 3.55 percent.
The dollar was up against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.67 percent at 76.974.
The euro <EUR=> was down 0.96 percent at $1.4856. Against
the yen, the dollar <JPY=> was up 0.07 percent at 92.10.
U.S. light sweet crude oil <CLc1> fell $2.38, or 2.96
percent to $78.12 a barrel.
Spot gold <XAU=> fell $12.85 to $1,041.60 an ounce.
The MSCI index of Asia-Pacific shares excluding Japan
<.MIAPJ0000PUS> fell 0.2 percent, holding below a near-15-month
peak set last week, while Japan's Nikkei average <> ended
up 0.8 percent at 10,362.62.
(Reporting by Angela Moon, Gertrude Chavez-Dreyfuss, Joshua
Schneyer and Richard Leong in New York; George Matlock in
London and Blaise Robinson in Paris; Writing by Herbert Lash;
Editing by James Dalgleish)
