* Wall Street slips on disappointing earnings, data
* Euro hits 3-month high on fears over U.S. economy
* U.S. 2-year Treasury note's yield hits all-time low
* Oil closes at 3-month high as dollar weakens broadly
(Updates to U.S. markets' close)
By Walter Brandimarte
NEW YORK, Aug 3 (Reuters) - Stocks paused a day after
hitting the highest level in 2-1/2 months, while the dollar
slid on Tuesday as disappointing earnings and U.S. economic
data gave investors reason to fret about the global recovery.
U.S. Treasury debt prices climbed as investors sold some equities, sending the two-year note's yield to an all-time
low, although analysts said U.S. stocks were expected to slip
some after Monday's rally drove them to a 10-week high.
A Wall Street Journal report that the Federal Reserve was
considering buying more bonds to prop up the economy further
lifted Treasuries' prices.
U.S. oil futures prices jumped to a three-month high above
$82 a barrel as the weaker dollar made it cheaper for
investors using other currencies to buy the commodity. But
commodity prices fell in general due to the growth concerns.
Gold was an exception, rising slightly as China announced
moves to allow greater freedom in domestic trading of the
metal.
Worries about the sustainability of the global recovery
increased after Dow Chemical Co <DOW.N> and Procter & Gamble
<PG.N> reported quarterly results that missed expectations,
even though strong earnings and a bullish outlook from
drugmaker Pfizer<PFE.N> offered some hope.
Strong earnings have driven the stock market's recent
rally, even as economic data systematically disappoints.
New orders received by U.S. factories dropped more than
expected in June, while sales of previously owned U.S. homes
fell to a record low, data released earlier in the day showed.
For details, see [] and [].
"People are beginning to accept that the U.S. economy is
coming back to earth and, as far as growth goes, may be
playing second fiddle to other economies," said Andrew
Wilkinson, analyst at Interactive Brokers Group in Greenwich,
Connecticut. "That's driven bond yields down and is sapping
the dollar."
Global stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> edged up 0.02 percent, just a blip above the
break-even line, after closing on Monday at their highest
level in 2-1/2 months.
The FTSEurofirst 300 index <> of top European shares
also closed practically flat, dipping 0.01 percent to 1,070.79
points as banks and miners gave back some of Monday's sharp
gains.
SOME SEE BUYING OPPORTUNITY
"A bout of weakness in the U.S. in reaction to
worse-than-expected home sales and factory orders data
unsettled traders, but these short-term dips are still
tempting in some buyers," said Will Hedden, sales trader at IG
Index in London.
The three major U.S. stock indexes slipped after each
gained about 2 percent on Monday to close at their highest
levels in 10 weeks.
On Tuesday, the Dow Jones industrial average <>
declined 38.0 points, or 0.36 percent, to end at 10,636.38,
while the Standard & Poor's 500 Index <.SPX> shed 5.40 points,
or 0.48 percent, to finish at 1,120.46. The Nasdaq Composite
Index <> lost 11.84 points, or 0.52 percent, to close at2,283.52.
Shares of Procter & Gamble <PG.N> exerted the heaviest
pull on the Dow, falling 3.42 percent to $59.94, while Dow
Chemical <DOW.N> shares sank 9.99 percent to $25.50.
[] []
On the other hand, shares of Dow component Pfizer<PFE.N>,
the world's largest drugmaker, rose 5.56 percent to $16.34.
The market "needs to pull back anyway," said Wayne
Kaufman, chief market analyst at John Thomas Financial in New
York. "But we did make a new high yesterday and took out
resistance, so the uptrend is very much alive."
The S&P Consumer Discretionary Sector <.GSPD> fell 1.3
percent after data showed consumer spending and incomes were
unexpectedly flat in June while personal savings rose to the
highest level in a year. []
"This shows that spending is slowing down and it's making
us back off the retail space," said Tom Nyheim, portfolio
manager at Christiana Bank & Trust Co in Greenville,
Delaware.
"It doesn't mean that we're going to slide into a
double-dip, but it does mean we should expect growth to be
slower" than previously thought, he said.
DOLLAR TUMBLES, TREASURIES RALLY
The dollar plunged in tandem with short-dated U.S.
Treasury debt yields due to fears that the U.S. economic
recovery was faltering.
The greenback slid against a basket of major currencies,
with the U.S. Dollar Index <.DXY> down 0.41 percent at 80.609.
The index fell below its 200-day moving average for the first
time since January, which analysts said may signal more dollar
selling ahead.
The euro hit a three-month high of $1.3261 against the
dollar. It pared gains later, but was still up 0.39 percent at
$1.3231. The dollar also fell below 86 yen <JPY=>, its weakest
showing against the Japanese currency since November. Late in
New York on Tuesday, the dollar was at 85.83 yen, down 0.76
percent.
Douglas Borthwick, a managing director at Faros Trading
LLC, in Stamford, Connecticut, noted that two-year swap
spreads between the United States and Europe are currently at
about 69 basis points.
"The yield differential is crying out for higher
euro/dollar," he said.
The two-year U.S. Treasury note<US2YT=RR> rose 2/32 in
price to yield 0.54 percent, down from Monday's close of 0.57
percent. Earlier on Tuesday, the two-year note's yield slid to
a record low of 0.52 percent.
The benchmark 10-year note <US10YT=RR> gained 17/32 in
price to yield 2.91 percent, down from 2.97 percent late
Monday.
Another positive catalyst for the Treasury debt rally was
an unsourced report by The Wall Street Journal that the
Federal Reserve would consider buying new mortgage or Treasury
bonds using the cash it receives when its mortgage-bond
holdings mature. []
U.S. crude oil prices <CLU0> rose $1.21, or 1.49 percent,
to settle at $82.55 a barrel, a three-month high, as the
dollar weakened.
Spot gold prices <XAU=> climbed rose 0.4 percent to
$1,185.60 after China's central bank said in a statement it
will let its banks import and export more gold as part of a
program to push forward the development of the country's
market in the precious metal. []
(Reporting and writing by Walter Brandimarte; Additional
reporting by Chris Reese, Steven C. Johnson and Leah Schnurr
in New York; Editing by Jan Paschal)
