* Pfizer-Wyeth deal fuels stock optimism about valuations
* Gold shoots above $900 an ounce on safe-haven buying
* Glimmer of housing market hope batters government debt
* Oil prices fall in anticipation of rising U.S. inventory
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Jan 26 (Reuters) - U.S. stocks rose on Monday on
investors' optimism over a $68 billion pharmaceutical takeover
and a surprise rebound in U.S. home sales in December, but gold
climbed above $900 an ounce in safe-haven buying.
An unexpected uptick in U.S. home sales provided a rare
bright spot in the slumping housing market while companies on
both sides of the Atlantic continued to slash jobs as a
year-long recession inflicted more pain on local economies.
Longer-dated U.S. and euro zone government debt prices
fell, bogged down by persistent concerns about the amount of
new issuance to flood markets this year to fund financial
sector bailouts and government stimulus packages.
Oil prices slipped 1.6 percent on expectations a government
report on Wednesday will show another rise in swelling U.S.
crude inventories as a deepening downturn pummels consumption.
The relentless wave of layoffs continued, with European and
U.S. corporations disclosing plans to cut more than 70,000 jobs
to cope with the downturn. The depth of the job losses
suggested the optimism in equity markets could easily change.
"Sentiment is still quite shaky, and at the first sign of
bad news, people are prepared to run for the hills again," said
David Watt, senior currency strategist at RBC Capital Markets
in Toronto.
Shares of Caterpillar Inc <CAT.N> fell 8.4 percent after
the heavy equipment maker forecast earnings in 2009 would drop
significantly from last year. The company also said it would
shed about 20,000 workers as it grapples with the turndown.
Shares of Pfizer <PFE.N>, the world's largest drugmaker,
fell 10.3 percent after said it agreed to acquire Wyeth <WYE.N>
for $68 billion. Wyeth shares fell 0.8 percent. The share price
of acquirers in takeovers often fall on cost concerns.
The Dow Jones industrial average <> closed up 38.47
points, or 0.48 percent, at 8,116.03. The Standard & Poor's 500
Index <.SPX> rose 4.62 points, or 0.56 percent, at 836.57. The
Nasdaq Composite Index <> gained 12.17 points, or 0.82
percent, at 1,489.46.
U.S. stocks briefly turned negative in the afternoon on the
grim jobs outlook. A Group of 20 official told Reuters the
International Monetary Fund will slash its 2009 world growth
forecast to 0.5 percent from 2.2 percent.
But investors liked the possibility of more deals ahead as
companies seek to position themselves defensively in the midst
of faltering global economies.
"Any kind of M&A is a positive and is seen as marking the
beginning of the light at the end of the tunnel," said Alan
Lancz, president of Alan B. Lancz & Associates Inc, an
investment advisory firm in Toledo, Ohio.
Britain's Barclays <BARC.L> added to the positive tone
after it said it did not need to raise fresh capital, sending
its beaten-down shares soaring 73 percent. Barclays helped a
recovery in other battered European financial stocks.
The FTSEurofirst 300 <> index of leading European
shares rose 3.2 percent at 784.66 points. The index had fallen
in 12 of the previous 13 sessions.
Among European banks, Lloyds <LLOY.L> jumped 32 percent,
ING <ING.AS> gained 28 percent and Royal Bank of Scotland
<RBS.L> added 19.8 percent.
Worries about a deepening global slowdown and ongoing
turmoil in the financial sector have proven enormous hurdles
for investors to overcome in January, a month that often sets
the tone for the rest of the year.
Sales of previously owned U.S. homes rebounded unexpectedly
in December, rising 6.5 percent, closing out a bleak year in
which prices dropped a record 15.3 percent, the National
Association of Realtors said.
Gold climbed to its highest level in more than three months
as interest in bullion as a haven from risk and a weaker dollar
against the euro spurred buying.
U.S. gold futures for February delivery <GCG9> settled up
$13 at $908.80 an ounce in New York.
"Gold is rising on the fallout from the renewed banking
crisis," said VM Group analyst Matthew Turner. "The banking
crisis is bad for share prices, and creates fear and panic.
Some investors are thinking gold is the safest option."
Robert Lutts, president and chief investment officer of
Cabot Money Management, said he expected gold could rise to
$2,000 an ounce over time as investors sought to protect their
assets.
"The central banks are printing trillions of dollars worth
of currencies, and there is no real asset behind it. So, every
dollar in my pocket is going to be worth less and less every
day," said Lutts, who oversees $400 million of client assets.
The decline in crude oil was tempered by evidence the
Organization of Petroleum Exporting Countries was complying
with the bulk of its output cut agreements.
U.S. crude <CLc1> fell 74 cents to settle at $45.73 a
barrel, after rising to a session high of $48.59. London Brent
<LCOc1> dipped $1.41, to $46.96 a barrel.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 1.17 percent at 84.584.
Against the yen, the dollar <JPY=> rose 0.23 percent at 89.01.
The euro <EUR=> rose 1.34 percent at $1.3163.
U.S. government bond prices were knocked lower on the home
sales data, as housing remains a key factor in the credit
crisis and the worst U.S. recession in decades.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
12/32 in price to yield 2.66 percent. The 30-year U.S. Treasury
bond <US30YT=RR> fell 44/32 in price to yield 3.38 percent.
Japan's Nikkei average <> fell 0.8 percent to close at
its lowest level in almost three months. MSCI's index of
Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> rose 0.4
percent.
Many Asian markets were closed for the Lunar New Year,
while Australia and India were shut for national holidays.
(Reporting by Ellis Mnyandu, Steven C. Johnson, John Parry in
New York and Jane Merriman, Atul Prakash and Jan Harvey in
London; writing by Herbert Lash; Editing by Leslie Adler)
