(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, April 21 (Reuters) - Surging oil prices hit new
highs on Monday as Bank of America's poor earnings and outlook
pulled down banking stocks and dashed hopes that a global
credit crisis was nearing an end.
The dollar fell broadly after weaker-than-expected profits
at Bank of America <BAC.N>, the largest U.S. retail bank, made
investors realize there was still more pain to come for
battered banks in the United States and Europe.
Crude oil prices hit record highs over $117 a barrel as
rebel attacks cut Nigerian supplies and a Scottish refinery
strike threatened North Sea crude production.
U.S. and euro zone government debt prices fell amid fading
hopes that the European Central Bank will cut interest rates or
that the Federal Reserve would continue aggressively cutting
rates.
The Dow industrials and the benchmark Standard & Poor's 500
Index closed slightly down, but the surge in oil prices
lifted energy stocks and the energy services sector. A rise in
Apple Inc, which reports results on Wednesday, led technology
shares and helped the tech-heavy Nasdaq close up.
European shares fell sharply on renewed concerns that the
banking sector could face a prolonged period of dreary earnings
from tight credit markets sparked by the U.S. housing slump.
Analysts said banks may need to raise more capital, and
Bank of America Chief Executive Kenneth Lewis said the effects
of the battered housing market may take at least the rest of
the year to work out.
"People think the profitability prospects for banks are
significantly damaged," said Stephen Massocca, co-chief
executive at San Francisco-based investment bank Pacific Growth
Equities. "I don't see nor do I anticipate that the bank
capital raises are over."
The Dow Jones industrial average <> fell 24.34 points,
or 0.19 percent, to 12,825.02 and the Standard & Poor's 500
Index <.SPX> slipped 2.16 points, or 0.16 percent, to
1,388.17. But the Nasdaq Composite Index <> gained 5.07
points, or 0.21 percent, to 2,408.04.
Investors had shrugged off weak earnings reports last week
from Citigroup Inc <C.N>, JPMorgan Chase & Co <JPM.N> and
Wachovia Corp <WB.N> amid optimism the credit crunch was past.
But Wall Street's mood turned gloomier after Bank of
America's results fell short as more consumers and businesses
fell behind on debt payments. Quarterly profit fell a
larger-than-expected 77 percent, dragged down by the bank's
more than $5 billion of write-downs and credit-related costs.
"The banking results are showing write-downs across the
different asset classes," said Willem Sels, a credit strategist
at Dresdner Kleinwort. "It's not just mortgages anymore, but
they are showing write-downs in small business loans and also
on consumer debt like auto loans."
If tight lending standards persist, corporate defaults will
rise relatively sharply, Sels said.
"Markets seem to want to focus on the positives and believe
that banks can start with a clean slate. But the loan and
mortgage books' problems are still there," Sels said.
A drop in shares of Royal Bank of Scotland <RBS.L>, which
was expected to announce a large rights issue, and Swiss food
group Nestle <NESN.VX> after a disappointing earnings update
pulled European shares lower.
RBS confirmed in a brief statement that it was considering
a rights issue, details of which could come on Tuesday.
The bank is set to announce Europe's biggest-ever rights
issue and more than $10 billion of losses on toxic investments
this week, people familiar with the matter have said.
The FTSEurofirst 300 <> index of top European shares
fell 1.06 percent to 1,311.82 points.
The index gained more than 3 percent last week after a
flurry of positive earnings surprises on both sides of the
Atlantic as the reporting season continued.
But Morgan Stanley said the bear market rally, which has
seen the pan-European FTSEurofirst 300 gain around 10 percent
from its low hit on March 17, is over.
Asian shares rose, led by financial firms, to their highest
in more than seven weeks in a rally that extended Friday's
gains on hopes the credit crisis may be at a turning point.
The MSCI measure of Asian stocks excluding Japan
<.MIAPJ0000PUS> rose 2.6 percent after earlier hitting its
highest level since Feb. 29.
Oil prices also gained support from officials with the
Organization of Petroleum Exporting Countries who said the
market had enough oil and that the producer group would not
ramp up output to help bring down prices.
U.S. light crude <CLc1> settled up 79 cents at $117.48 a
barrel, off the record high of $117.76 hit earlier. London
Brent crude <LCOc1> settled 51 cents higher at $114.43 a barrel
after hitting an all-time peak of $114.86.
Gold ended lower after rising earlier on the back of the
record high oil prices as investors traded cautiously after
Friday's sell-off.
Gold is generally seen as a hedge against oil-led
inflation. The metal also moves in the opposite direction of
the dollar, as a weaker U.S. currency makes gold cheaper for
holders of other currencies and often lifts bullion demand.
Gold <XAU=> rose as high as $928.50 an ounce and was at
$913.80/914.60 in afternoon trade.
The dollar fell against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> off 0.48 percent
at 71.619. The euro <EUR=> rose 0.71 percent to $1.5926.
Against the yen, the dollar <JPY=> fell 0.41 percent to
103.23.
U.S. Treasury debt prices were mixed.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 4/32 in price, with the yield at 3.72 percent. The
two-year U.S. Treasury note <US2YT=RR> was down 3/32, with the
yield at 2.19 percent. The 30-year U.S. Treasury bond
<US30YT=RR> was up 8/32, with the yield at 4.48 percent.
(Reporting by Ellis Mnyandu, Vivianne Rodrigues and Ellen
Freilich in New York, and Natalie Harrison and Ikuko Kao in
London; Editing by Jonathan Oatis)
