* U.S. stocks rise in late-day surge driven by energy
* Oil rebounds off 16-month low; analysts expect OPEC cut
* Euro at two-year low vs dollar as safety drives buying
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Oct 23 (Reuters) - Investors snapped up
beaten-down energy shares on Thursday, lifting U.S. stocks in a
roller-coaster session and easing the aversion to risk that has
been gripping global financial markets, while oil rose in
anticipation of an OPEC cut in crude production.
U.S. stocks partially clawed back from five-year lows as a
surge in oil shares turned currency and government debt markets
higher in volatile trade, and pulled European shares off losses
as deep as 3.2 percent to close barely lower.
The tech-rich Nasdaq fell on concerns technology spending
will decline in a global downturn. Online retailer Amazon.com
Inc <AMZN.O>, which had suffered steep losses for most of the
day after saying holiday sales at year's end would miss Wall
Street expectations, eked out a small gain at day's end.
Energy shares surged on both sides of the Atlantic, pushed
up by rising crude prices a day before an emergency meeting of
the Organization of Petroleum Exporting Countries.
Many OPEC members have called for a cut in oil production,
and the S&P Energy Index <.GSPE> surged 6.6 percent.
Oil giants were the major gainers in Europe, with BP <BP.L>
and Royal Dutch Shell <RDSb.L> both rising more than 5 percent.
Exxon Mobil <XOM.N> and Chevron <CVX.N> rose 9 percent and 8.2
percent, respectively, leading the Dow to a 2 percent gain.
Despite the late-day surge, analysts said U.S. stocks rose
off oversold conditions, and they were cautious about the
market's ability to sustain a rally amid a darkening economic
outlook in the United States and worldwide.
"The market overall remains very radically oversold but it
has been for weeks now," said Chip Hanlon, president of Delta
Global Advisors Inc in Huntington Beach, California.
"One would think one of these rallies would take hold and
move substantially higher, but after a few false starts it
becomes harder to have conviction that this is the one."
U.S. stocks tried several times to hold brief rallies
throughout the session, but risk aversion remained strong.
Traders said forced selling due to hedge fund and mutual
fund redemptions contributed to a steep drop in afternoon
trading that pushed the S&P 500 down 4 percent at one point.
"What we are seeing here is forced selling and redemptions.
Everything is getting slammed, regardless of whether it makes
sense or not," said Stephen Massocca, co-chief executive, San
Francisco-based investment bank Pacific Growth Equities.
The Dow Jones industrial average <> closed up 172.04
points, or 2.02 percent, at 8,691.25. The Standard & Poor's 500
Index <.SPX> added 11.33 points, or 1.26 percent, at 908.11.
The Nasdaq Composite Index <> fell 11.84 points, or 0.73
percent, at 1,603.91.
U.S. workers lined up for jobless benefits in unexpectedly
large numbers last week as the trauma in financial markets
continued to hammer the economy, fresh U.S. government data
showed.
Adding to the gloom, companies announced deeper job cuts to
stop the financial bleeding caused by the credit crisis.
"We're looking at the economy contracting in the fourth
quarter very sharply, certainly contracting in the first
quarter, maybe contracting in the second quarter as well," said
Nigel Gault, chief U.S. economist at Global Insight in
Lexington, Massachusetts.
"Going through that whole period with GDP actually
declining, all the time that's happening, you're going to see
heavy job losses," Gault said.
The FTSEurofirst 300 <> index of top European shares
ended 0.1 percent lower at 872.72 points as losses in banks and
automobiles eclipsed the gains in oil and defensive shares.
Mercedes-Benz maker Daimler <DAIGn.DE> fell 1.3 percent as
it lowered its full-year revenue and profit forecast after
third-quarter operating profit plunged by two-thirds.
"The market did not like Daimler results," said Philip
Lawlor, a strategist at Nomura.
"Daimler is very exposed to the high-end market which is
falling off a cliff in the U.S. It is a reiteration of just how
grim the economic backdrop is a the moment," he said.
Oil rose on expectations the Organization of Petroleum
Exporting Countries will agree to cut output at an emergency
meeting because of slowing demand and the growing crisis.
OPEC members gathering in Vienna ahead of Friday's meeting
have pointed toward a cut, with Iran suggesting a 2 million
barrels per day cut and Qatar at least a 1 million reduction.
Analysts polled by Reuters anticipate the cartel will
reduce output by 1 million to 1.5 million barrels per day.
U.S. crude <CLc1> settled at $67.84 per barrel, gaining
$1.09. London Brent crude <LCOc1> gained $1.64 to $66.16.
The euro rebounded versus the dollar after the U.S.
currency touched a two-year high as gains in the stock market
prompted some profit-taking against the greenback.
The euro gained and weakened against the dollar in a
see-saw day, and analysts said currencies remained vulnerable
to erratic moves.
"Investors are still very panicky and very much in a
trigger-happy mood. The market is still dominated by risk
aversion flows and and we are pretty much trading off what
equities are doing," said Boris Schlossberg, director of
foreign exchange research at GFT Forex in New York.
"The reason we have such volatility is because visibility
is completely clouded. Almost all asset classes are being
priced for a very serious, almost depression-like scenario and
the market is waiting to see if this is going to happen."
After rising earlier on renewed flight to safety buying,
U.S. Treasury debt prices were lower at day's end.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
8/32 in price to yield 3.63 percent, and the 2-year U.S.
Treasury note <US2YT=RR> fell 5/32 in price to yield 1.58
percent.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 0.41 percent at 85.091.
Against the yen, the dollar <JPY=> fell 0.53 percent at 97.34.
The euro <EUR=> rose 0.49 percent at $1.2915.
The reversal in the dollar's strength lifted gold, after it
hit a 15-month low and briefly traded below $700 an ounce as
funds sold heavilty to raise cash. Spot gold prices <XAU=> fell
$6.50 to $721.15 an ounce, after earlier falling as low as
$697.45.
In Asia, Japan's Nikkei average <> closed down 2.5
percent after earlier hitting its lowest point since May 2003
(Reporting by John Perry, Lucia Mutikani and Gertrude
Chavez-Dreyfuss in New York and Joanne Frearson, Ikuko Kao in
London; Writing by Herbert Lash; Editing by Leslie Adler)
