* Moody's downgrade of Greece slices into stocks' rally
* Euro climbs for 5th straight session
* Oil up on increased risk appetite
By Manuela Badawy
NEW YORK, June 14 (Reuters) - U.S. stocks finished
Monday's session little changed in thin volume after a global
rally was interrupted by a downgrade of Greece's debt to junk
status, while the euro soared on strong European economic
data.
Oil prices settled almost 2 percent higher as risk
appetite improved on economic recovery optimism, while
safe-haven U.S. Treasuries and gold prices fell as investors'
taste for risk grew.
The euro and stocks had been struggling lately on fears
that debt crises in several European countries would imperil
the banking sector and slow growth in the 16-country euro zone
to a crawl, hampering a global economic recovery.
Although not unexpected, the downgrade weighed on a market
that had rallied briskly off earlier data showing euro-zone
industrial output surged in April, achieving the biggest
year-on-year percentage gain in almost two decades.
[]
Moody's Investors Service lowered Greece's sovereign debt
rating to BA1, which is junk-grade status, from an
investment-grade level of A3, citing concerns about risks
associated with euro zone's IMF support package.
"The market took this report negatively. But I am not
really surprised because even absent the ratings agency
action, Greece's paper is worthless except for that fact that
the European Central Bank is buying it," said Richard
Franulovich, senior currency strategist at Westpac in New
York.
The Dow Jones industrial average <> slipped 20.18
points, or 0.20 percent, to close at 10,190.89. The Standard &
Poor's 500 Index <.SPX> dipped 1.97 points, or 0.18 percent,
to finish at 1,089.63. But the Nasdaq Composite Index <>
squeaked out a tiny gain of just 0.36 of a point, or 0.02
percent, to end at 2,243.96.
The euro <EUR=> rose to a session high, coming within a
breath of $1.23, its highest level since early June, but it
later pared gains after Moody's cut Greece's credit rating as
the country faces substantial risks. For more see
[]. Late Monday in New York, the euro was up 1
percent at $1.2234.
But analysts said most investors had anticipated the move,
which let them focus instead on stronger-than-expected euro-zone industrial data and extend a bout of short-covering that
has added some 4 cents to the euro since it hit $1.1876 last
week, its lowest since 2006. []
"We've been trading with this for a long time and just the
facts that the agencies finally recognize reality doesn't have
too much impact," said Sebastien Galy, senior strategist at
BNP Paribas in New York. "Asset managers are fairly smart
people and anticipated this, as did pension funds, a long time
ago."
Despite Monday's gains, the euro is still down almost 15
percent against the dollar this year.
However the CBOE volatility index <.VIX> or VIX, Wall
Street's main barometer of investor fear, fell 0.73 percent to
end at 28.58. This decline indicated the market was not
anticipating a return of recent volatility when the VIX rose
to nearly 50 in mid May.
U.S. oil prices <CLc1> rose $1.34, or 1.82 percent, to
settle at $75.12 per barrel. Before the downgrade, oil futures
prices rose more than 2.5 percent.
Spot gold prices <XAU=> fell $3.90, or 0.32 percent, to
$1,222.00 an ounce.
U.S. Treasuries eased in light trading volume as early
strength in stocks undermined the safe-haven appeal of lower-
risk U.S. government debt.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 5/32, with the yield at 3.26 percent. The 2-year U.S.
Treasury note <US2YT=RR> was unchanged, with the yield at
0.7350 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
down 15/32, with the yield at 4.18 percent.
(Reporting by Manuela Badaway; Additional reporting by Steve
C. Johnson, Edward Krudy and Gertrude Chavez-Dreyfuss; Editing
by Jan Paschal)
