* U.S. stocks fall on credit jitters, poor economic data
* Uncertainty over revised U.S. bailout plan boosts bonds
* Oil slips below $96 barrel on U.S. crude inventory build
* U.S. manufacturing, jobs data heighten economic concerns
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Oct 1 (Reuters) - Credit jitters and dour U.S.
economic news sent Wall Street lower and lifted safe-haven
assets on Wednesday, overshadowing hopes the Senate will
approve revised plans to rescue the troubled financial sector.
Persistent credit market distress and a raft of
deteriorating economic data on both sides of the Atlantic
pushed investors into the safety of U.S. and euro zone
government debt. Gold also rose on a renewed safe-haven bid.
Oil slipped briefly below $96 a barrel on sliding fuel
demand and an increase in crude inventories that was larger
than expected. Copper slid to a 19-month low as data pointed to
slowing economic growth in Europe and the United States.
The dollar rallied as investors waited for the U.S. Senate
to vote on a revised $700 billion bailout plan to tackle the
worst financial crisis since the Great Depression.
Stocks pared steep losses, with the Dow briefly turning
positive, after General Electric <GE.N> said investor Warren
Buffett planned to pump $3 billion into the company. But fears
about credit markets and the economy sent stocks lower again.
The Senate plan, which would allow the U.S. Treasury to buy
bad mortgage-related assets from banks, aims to ease credit
markets and avert a deepening global economic crisis. European
stocks and U.S. bank shares rose ahead of the evening vote.
But the cost of borrowing dollars over three months rose as
short-term lending remained nearly frozen and investors
anticipated an intensification of global financial strains at
year end. Interbank rates remained stuck near record levels.
"Three-month Libor still shows severe dislocation going
into year end," T.J. Marta, fixed income strategist with RBC
Capital Markets in New York, said about the London interbank
offered rate.
"Yes, we survived quarter-end but we are still looking at
some type of potential Armageddon," Marta said.
Economic reports darkened the picture for U.S. employment
and manufacturing. U.S. factory activity shrank in September to
its lowest since the 2001 recession and private employers shed
jobs for the third time in four months as the worsening
financial crisis tightened its grip on the U.S. economy.
Shares of heavy-equipment manufacturer Caterpillar <CAT.N>,
an economic bellwether, slid 4.45 percent, the second-biggest
drag on the Dow. Financial stocks surged, with the KBW index of
banking shares <.BKX> rising about 7 percent.
"The backdrop for the stock market today is an intensifying
concern to what extent the global economy will slow down. But
financials are up on expectations we'll get a bailout package
this time around," said Matt Kaufler, a portfolio manager with
Clover Capital Management in Rochester, New York.
The Dow Jones industrial average <> closed down 19.59
points, or 0.18 percent, at 10,831.07. The Standard & Poor's
500 Index <.SPX> fell 5.27 points, or 0.45 percent, at
1,161.09. The Nasdaq Composite Index <> slipped 22.48
points, or 1.07 percent, at 2,069.40.
European shares ended higher. The FTSEurofirst 300 <>
index of top European shares closed 0.85 percent higher at
1,072.64. The benchmark has lost 29 percent so far this year.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.54 percent at 79.725.
The euro <EUR=> fell 0.61 percent at $1.4016, and against
the yen, the dollar <JPY=> rose 0.01 percent at 106.04.
Adding to the dollar's attractiveness against the euro and
to credit market tightness, manufacturing in the euro zone fell
to a near seven-year low in September.
"It is obvious that the credit market is affecting the real
economy and this data confirms that. So markets are hopeful
more than ever that the bailout package would pass," said
Matthew Strauss, senior currency strategist at RBC Capital
Markets in Toronto.
A bond rally in Europe fizzled out as European shares
regained some ground to close higher but U.S. debt prices were
higher.
The benchmark 10-year U.S. Treasury note <US10YT=RR> added
23/32 in price to yield 3.73 percent, and the 2-year U.S.
Treasury note <US2YT=RR> rose 9/32 to yield 1.82 percent.
Crude prices fell after data from the Energy Information
Administration showed oil inventories in the United States, the
world's largest oil consumer, rose by 4.3 million barrels last
week. Analysts had expected a 2.4 million barrel increase.
U.S. crude <CLc1> settled at $98.53 a barrel, down $2.11.
London Brent crude <LCOc1> settled down $2.95 at $95.22 a
barrel.
"The energy industry in the U.S. Gulf Coast is on the road
to recovery, and this will add to the bearish sentiment in the
market," said Phil Flynn, an analyst with Alaron Trading in
Chicago.
Gold rose, despite a stronger dollar.
December gold futures <GCZ8> settled up $6.50 at $887.30 an
ounce in New York.
Copper for delivery in three months <MCU3> in London hit
$6,120 a tonne, its lowest since March 2007.
Many Asian markets were closed for holidays, including
China, Hong Kong and Singapore.
Japan's Nikkei share average <> rose 1 percent, after
posting its biggest monthly fall in eight years in September.
(Reporting by Steven C. Johnson, Ellis Mnyandu, Rebekah Kebede
Chris Reese, Nick Olivari and Gertrude Chavez-Dreyfuss in New
York; Writing by Herbert Lash; Editing by James Dalgleish)
