* U.S. stocks rise on recovery optimism
* Dollar gains on strong U.S. economic data, Fed minutes
* Bonds fall as Fed plans to cut cash supply from markets
(Updates with closing prices, Fed meeting minutes, quote)
By Manuela Badawy
NEW YORK, Feb 17 (Reuters) - U.S. stocks rose and the U.S.
dollar appreciated against other major currencies on Wednesday
helped by stronger U.S. economic data and minutes from the
Federal Reserve that suggested the U.S. central bank will soon
begin withdrawing its huge monetary stimulus.
Stocks also gained worldwide on rekindled investor risk
appetite, which had taken a hit from concerns about the swollen
debt of Greece and other euro zone countries.
U.S. bonds fell after the Fed said in the minutes from its
January Federal Open Market Committee policy meeting it wants
to begin selling securities relatively soon as a way to cut
back its massive supply of cash to the financial system. For
details see [].
Commodity prices continued their rally though at a slower
pace, as the strength in the U.S. currency tends to pressure
dollar-denominated commodities.
The U.S. Commerce Department reported earlier on Wednesday
that housing starts hit their highest in six months while
Federal Reserve data showed industrial output rose a solid 0.9
percent in January, signs that an economic recovery was taking
a firm hold as the year began.
The Dow Jones industrial average <> closed up 40.43
points, or 0.39 percent, at 10,309.24. The Standard & Poor's
500 Index <.SPX> ended up 4.64 points, or 0.42 percent, at
1,099.51. The Nasdaq Composite Index <> finished up 12.10
points, or 0.55 percent, at 2,226.29.
U.S. stocks were also boosted by strong results from farm
equipment maker Deere & Co <DE.N>. The results followed the
upbeat trend in fourth-quarter U.S. corporate results, with
more than 70 percent of the Standard & Poor's 500 companies
beating analyst earnings estimates so far, according to Thomson
Reuters data.
MSCI world equity index <.MIWD00000PUS> rose 0.87 percent,
while the pan-European FTSEurofirst 300 <> index of top
European shares hit a two-week closing high, up 1.3 percent,
boosted by financials after BNP Paribas <BNPP.PA>
fourth-quarter profits beat forecasts and operational results
from ING <ING.AS> pleased investors.
The U.S. dollar extended gains against other major
currencies after the Fed minutes with the dollar index <.DXY>
gaining 1 percent at 80.500. The euro <EUR=> fell 1.18 percent
at $1.3606 from a previous session close of $1.3768. Against
the yen, the dollar <JPY=> rose 1.21 percent at 91.19 yen.
"The minutes are consistent with an economy and financial
system that are stabilizing," said Omer Esiner, U.S. Market
Analyst at Travelex Global Business Payments in Washington.
"Policy makers seem to be agreeing on a number of issues,
such as discount window spreads, which is further evidence
conditions are normalizing. From a markets perspective, this is
clearly another dollar positive."
However, this concerns investors in government debt because
the Fed has been a key pillar of support during the economic
downturn.
U.S. bonds fell, with the benchmark 10-year U.S. Treasury
note <US10YT=RR> dropping 21/32, with the yield at 3.74
percent.
Housing, which is at the core of the most painful economic
downturn since the Great Depression, is crawling out of a
three-year slump, supported by government programs. New home
construction contributed to economic growth in the third
quarter of 2009 for the first time since 2005. []
Groundbreaking for new homes increased 2.8 percent to a
seasonally adjusted annual rate of 591,000 units while new
building permits, which give a sense of future construction,
fell 4.9 percent to 621,000 units last month after rising to a
14-month high of 653,000 in December, the Commerce Department
said. That compared to analysts' forecasts for 620,000 units.
In Europe, debt markets took a breather from the crisis
over debt-stricken Greece after Spain drew a stampede of demand
for a government bond issue and Portugal's borrowing costs fell
in signs that market fears of sovereign risk in the euro zone
may be easing, at least for now. []
(Additional reporting by Vivianne Rodrigues; Editing by James
Dalgleish)
