* U.S. stocks gain on optimism over new Fed program
* Debt prices rise on gloomy U.S. GDP data, Fed worries
* Oil falls more than $3 as data points to deep recession
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Nov 25 (Reuters) - U.S. stocks rose on Tuesday
after the Federal Reserve unveiled a massive new program to aid
the beleaguered American consumer, while oil prices fell on
further signs the economic slowdown is deepening.
The Fed's multi-pronged program gave investors both
optimism that the central bank's efforts to bolster the
slumping housing and consumer-lending markets will work, and
pause, because of the huge amounts of money the government is
throwing at the financial crisis.
The euro posted its best three-day advance ever and
sterling hit a two-week high against the dollar as safe-haven
buying of the U.S. currency ebbed, while government debt prices
rallied as investors flocked to bonds on recession fears.
A report showed the U.S. economy contracted at its fastest
pace in seven years in the third quarter, with consumer
spending plunging to a 28-year low, raising the specter of a
deeper recession. The report, however, was within market
expectations.
"There were fears that report would be much worse. Together
with the Fed measures to boost consumer credit, these should
ease risk aversion at least for now," said Ron Simpson,
director of foreign exchange research at Action Economics, in
Tampa, Florida. "The markets were relieved."
Banking and retail shares rose on the Fed's moves to
generate consumer lending, lifting the Dow and the broad S&P
500 indexes. The Dow posted its first positive three-day run
since late August.
But the Nasdaq slid on signs of weakening demand in the
technology sector on news from Cisco Systems <CSCO.O>, along
with the weak economic data.
The Dow Jones industrial average <> rose 69.61 points,
or 0.82 percent, at 8,513.00. The Standard & Poor's 500 Index
<.SPX> gained 8.57 points, or 1.01 percent, at 860.38. The
Nasdaq Composite Index <> fell 5.17 points, or 0.35
percent, at 1,466.85.
Despite the gains on Wall Street, analysts said there were
concerns about the long-term costs of the government's
initiatives to avert a prolonged and deep recession.
"The size of this just keeps growing. There's nothing to
stop it at this point," said Chuck Butler, president at
Everbank World Markets in St. Louis.
"The markets are becoming alarmed by the amount of money
being thrown at the problem, not that it's not needed, but it's
a staggering amount of money," said Peter Kenny, managing
director of Knight Equity Markets in Jersey City, New Jersey.
"It gives the markets reason for pause."
JPMorgan Chase <JPM.N> rose almost 8 percent, while leading
retailer Wal-Mart Stores <WMT.N> gained 3.6 percent.
Cisco said it planned a four-day shutdown to cut costs for
the first time in the company's history, underscoring weakening
demand as consumers and businesses cut spending. Cisco shares
tumbled 6 percent.
European shares eked out a gain as rising bank and energy
stocks offset declines in autos and drugmakers and a slide in
miner Rio Tinto after BHP Billiton dumped its bid.
The FTSEurofirst 300 <> index of top European shares
ended up 0.6 percent at 833.36 points.
Longer-dated euro zone government debt rose, tracking a
steep fall in U.S. bond yields after the report on U.S. gross
domestic product and a report showing single-family U.S. home
prices plunged a record 17.4 percent in September from a year
ago.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
65/32 in price to yield 3.10 percent. The 2-year U.S. Treasury
note <US2YT=RR> added 6/32 in price to yield 1.16 percent.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 1.12 percent at 84.752.
Against the yen, the dollar <JPY=> fell 1.44 percent at 95.64.
The euro <EUR=> rose 1.18 percent at $1.3065.
U.S. crude <CLc1> settled down $3.73 at $50.77, partially
erasing a near 9 percent jump on Monday. London Brent crude
<LCOc1> traded down $3.58 to settle at $50.35 a barrel.
"The focus in the oil markets is again on softening demand
in the wake of a weak GDP," said Phil Flynn, analyst at Alaron
Trading.
Gold ended a hair lower, recovering from earlier 2 percent
losses, as the dollar slid for the third consecutive session.
The December gold contract <GCZ8> settled down $1 at
$818.50 an ounce in New York.
Before the Federal Reserve unveiled efforts to support the
U.S. financial system, Asian shares rallied and bonds fell
overnight after the U.S. government rescued Citigroup.
Japan's Nikkei average <> jumped 5.2 percent, resuming
trade after a public holiday, and MSCI's index of Asia-Pacific
stocks excluding Japan <.MIAPJ0000PUS> rose 3.4 percent.
(Reporting by Leah Schnurr, John Parry, Vivianne Rodrigues in
New York and Ian Chua, Jane Merriman, Sitaraman Shankar and Jan
Harvey in London; writing by Herbert Lash; Editing by Leslie
Adler)
