(Adds close of U.S. markets)
* U.S. stocks rise, led by tech shares, on deal news
* Crude oil slips after coming close to record highs
* Dollar rebounds versus euro as U.S. stocks gain
By Herbert Lash
NEW YORK, May 15 (Reuters) - U.S. stocks rose on Thursday
as a battle to control Internet media company Yahoo Inc boosted
the technology sector and a pullback in oil eased concerns
about inflation.
Wall Street shrugged off weak economic data that showed
softness in manufacturing and America's labor market, but U.S.
Treasury debt prices rose on the economic reports.
The yen, meanwhile, rose across the board as investors
reduced demand for riskier assets as the data added to anxiety
over the growth picture in the United States, although the
dollar rebounded against the euro as U.S. stocks gained.
Factory activity in the U.S. mid-Atlantic region shrank for
a sixth straight month in May, while manufacturing in New York
State also declined this month, according to reports by
regional Federal Reserve banks.
Dollar losses were capped as European Central Bank
President Jean-Claude Trichet warned that euro-zone growth may
not be so flattering in the months ahead.
Oil fell in a volatile session after nearing this week's
record high of $126.98 as a surprisingly large increase in U.S.
natural gas inventories contributed to crude's fall.
In the U.S. stock market, shares extended gains in late
trade after a deal between key members of the U.S. Senate
raised hopes of a package to rescue the housing market.
Under the deal, Fannie Mae <FNM.N> and Freddie Mac
<FRE.N>, the two government-sponsored enterprises that are the
top two U.S. housing finance companies, would backstop a
government mortgage insurance fund, two industry sources said.
The Dow Jones industrial average <> was up 94.28
points, or 0.73 percent, at 12,992.66. The Standard & Poor's
500 Index <.SPX> was up 14.91 points, or 1.06 percent, at
1,423.57. The Nasdaq Composite Index <> was up 37.03
points, or 1.48 percent, at 2,533.73.
The Standard & Poor's 500 Index, a closely watched
measure of stock performance, and the Nasdaq both closed at a
four-month highs.
New York Stock Exchange trading volume remained well below
normal on Thursday, with just 1.19 billion shares trading
hands. On Monday, volume hit a low for the year at 1.05
billion.
Investors took heart in deal news. Hedge fund Paulson & Co,
which has built up a stake of 50 million shares in Yahoo
<YHOO.O>, said it intends to support a a dissident board slate
put forth by billionaire investor Carl Icahn.
Paulson said it hopes a proxy fight won't be necessary to
get Yahoo and Microsoft <MSFT.O> back to the bargaining table.
Shares of Yahoo closed up 2.3 percent at $27.75, and shares of
Microsoft closed up 1.7 percent at $30.45.
In other deal news, CBS Corp<CBS.N> said it would buy Web
media company CNET Networks <CNET.O>. CNET surged 43.5 percent
to $11.41, and CBS fell 2.4 percent to $24.23.
Technology stocks led U.S. shares higher, with Intel up
almost 5 percent and the Philadelphia Stock Exchange
semiconducter index <.SOXX> up 1.7 percent.
Fed Chairman Ben Bernanke reminded investors of lingering
weakness in the banking sector, calling for some banks to raise
more capital. Bernanke said financial market turmoil
underscores the need for "generous" capital cushions.
"Generally, things are better than the bad we expected,"
said Linda Duessel, market strategist at money manager
Federated Investors in Pittsburgh. "The fact we've started to
see M&A (mergers and acquisitions) beginning to pick up again a
little is a start."
European shares rose as commodity and drug stocks gained
and economic data showed a surprisingly resilient euro zone
economy, offsetting the impact of concern over more write-downs
and rights issues in the banking sector.
The pan-European FTSEurofirst 300 <> index ended 0.4
percent higher at 1,359.86 points, its third day of modest
gains this week. The index has gained 1.7 percent in May, after
a 6 percent rise in April, with underlying bullishness due to
strong economic growth data from the region.
Economic growth in the euro zone rose 0.7 percent in the
first quarter from the last quarter of 2007, led by a big jump
in Germany, beating analysts' expectations.
"It looks as if the European Central Bank will stay on
hold. Interest rates and bond yields may now be low enough for
risk appetite to ... put equities under upward pressure," said
Bernard McAlinden, strategist at NCB Stockbrokers in Dublin.
BT Group <BT.L> jumped 5.4 percent after posting strong
fourth-quarter results, while Deutsche Postbank <DPBGn.DE> rose
3 percent to top German gainers on talk of takeover interest
from insurer Allianz <ALVG.DE>. Allianz and Postbank's owner
Deutsche Post <DPWGn.DE> both declined to comment.
Oil prices finished slightly lower in a volatile session
associated with the expiration of June contract options.
A slide in falling natural gas futures helped the sell-off
in crude, traders said. A power outage that shut the
Intercontinental Exchange's trading platform for more than
three hours also was cited as adding to the volatility.
U.S. crude <CLc1> settled down 10 cents at $124.12 a
barrel, after dipping as low as $120.75 a barrel earlier. Oil
also traded as high as $126.64.
London Brent crude <LCOc1> settled 61 cents lower at
$121.25 a barrel.
U.S. government debt rose. The benchmark 10-year U.S.
Treasury note <US10YT=RR> rose 26/32 to yield 3.82 percent. The
2-year U.S. Treasury note <US2YT=RR> rose 5/32 to yield 2.44
percent. The 30-year U.S. Treasury bond <US30YT=RR> rose 35/32,
to yield 4.55 percent.
The dollar gained against major currencies, with the U.S.
Dollar Index <.DXY> up 0.03 percent at 73.305.
The euro <EUR=> fell 0.11 percent at $1.5458, and against
the yen, the dollar <JPY=> fell 0.38 percent at 104.64.
Spot gold prices <XAU=> rose $17.80, or 2.06 percent, to
$881.45.
(Additional reporting by Kristina Cooke, Lucia Mutikani and
John Parry in New York and Jane Merriman, Lewa Pardomuan and
Sitaraman Shankar in London; Editing by Leslie Adler)
