(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, May 1 (Reuters) - U.S. stocks rallied on Thursday
as a surging dollar and falling commodity prices eased
inflation fears and revived investors' appetite for risk,
especially for beaten-down financial and technology shares.
Oil prices fell as concerns about Nigerian crude supplies
eased following a strike deal and U.S. demand showed further
signs of weakness. Gold hit a four-month low below $850,
triggering a sell-off in other precious metals.
Treasury debt prices retreated as U.S. economic data
suggested the Federal Reserve would put its monetary easing on
hold, lifting the dollar against the euro and to a seven-week
high against a basket of major trading-partner currencies.
Investors took heart in the positive aspects of U.S.
spending and core inflation data, as well as a manufacturing
survey for April.
They also shrugged off higher-than-expected U.S. initial
jobless claims a day before the government's April jobs report
and after the Federal Reserve cut a benchmark interest rate to
2 percent to stimulate the flagging economy.
Shares of Apple Inc <AAPL.O> jumped 3.5 percent on news of
a deal to sell movies on iTunes the same day they are available
on DVD, boosting the outlook for iPod media player sales.
Research In Motion Ltd <RIM.TO><RIMM.O>, the BlackBerry
maker, jumped 5.3 percent and also helped to drive the Nasdaq
near its highest level this year.
"Never have I seen tech this cheap," said David Bianco,
chief U.S. equity strategist at UBS in New York. "So when
you've got some signs of encouragement in the economy, I think
people are feeling as if they can take advantage of the value
seen in tech."
As tech shares gained, energy companies' stocks fell, a
trend aided by disappointing quarterly results from oil company
Exxon Mobil Corp <XOM.N>, whose shares fell 3.6 percent.
The S&P Financial index <.GSPF> surged almost 4 percent,
led by a 5 percent gain in Bank of America <BAC.N> and
Citigroup's <C.N> 4.3 percent rise.
The Dow Jones industrial average <> rose 189.87 points,
or 1.48 percent, to 13,010.00. The Standard & Poor's 500 Index
<.SPX> gained 23.75 points, or 1.71 percent, to 1,409.34. The
Nasdaq Composite Index <> added 67.91 points, or 2.81
percent, to end at 2,480.71.
European shares ended flat as vague merger and
acquisition chatter supported miners, while consolidation hopes
helped propel British Airways <BAY.L> 7.3 percent higher.
The pan-European FTSEurofirst 300 index <> ended up
0.1 percent at 1,339.02, with British shares unchanged at
6,087.3.
Investors shrugged off data showing that growth in
Britain's manufacturing sector slowed in April, as expected.
But there was no let-up in inflationary pressures as firms
ratcheted up prices at the fastest rate on record.
Investors also were optimistic after the Bank of England
said the scale of losses and the economic fallout from the
global credit crunch may not be as bad as feared and subprime
losses could end up costing less than half market forecasts.
The dollar rose after the Fed on Wednesday indicated it was
worried about rising inflation expectations, suggesting it
would pause in cutting rates.
"The most important thing right now is the U.S. dollar,"
said Tim Smalls, head of U.S. stock trading at brokerage firm
Execution LLC in Greenwich in Connecticut.
"As long as the dollar continues to rally as it's doing
right now, commodities are going to come off and the inflation
scare gets mitigated slightly."
The dollar rose against major trading-partner currencies,
with the U.S. Dollar Index <.DXY> up 0.93 percent at 73.282.
The euro <EUR=> fell 1.04 percent at $1.5453, and against
the yen, the dollar <JPY=> rose 0.41 percent at 104.35.
Bond prices succumbed to traders paring bond positions
ahead of Friday's U.S. payroll report, investors said.
"The bond market is suggesting that the rate-cutting cycle
is in a pause or near the end," said Colin Lundgren, head of
institutional fixed-income at RiverSource Investments in
Minneapolis.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
10/32 to yield 3.77 percent. The 2-year U.S. Treasury note
<US2YT=RR> fell 7/32 to yield 2.38 percent. The 30-year U.S.
Treasury bond <US30YT=RR> fell 14/32 to yield 4.50 percent.
U.S. crude <CLc1> settled 94 cents lower at $112.52 a
barrel, extending losses into a third straight day. London's
Brent <LCOc1> fell 86 cents to $110.50 a barrel.
Oil has fallen from record highs near $120 hit last month
as demand in the United States, the world's top consumer, sags
under the weight of surging fuel prices and wider economic
problems.
U.S. oil demand fell 7 percent in February compared with
year-ago levels, according to a report from the U.S. Energy
Information Administration released this week.
Gold <XAU=> fell as low as $847.10 an ounce and last traded
at $850.25/851.65 in New York.
Silver and palladium hit three-month lows, while platinum
shed 3 percent to a one-month low below $1,850 an ounce.
In Asia, Japanese stocks retreated as investors booked
profits following the market's biggest month of gains in 13
years. The Nikkei average <> slipped 0.6 percent.
(Reporting by Jennifer Coogan, Matthew Robinson, Chris Reese,
Gertrude Chavez-Dreyfuss in New York and Michael Taylor in
London; Editing by Dan Grebler)
