* U.S. stocks surge, bargains snapped up in wild session
* Dollar gains as weak U.S. data sparks risk aversion
* Oil slips below $70 for first time since August 2007
(Adds volatility comment in paragraphs 12, 13, 14)
By Herbert Lash
NEW YORK, Oct 16 (Reuters) - U.S. stocks jumped in a late
surge on Thursday, as investors snapped up battered stocks a
day after Wall Street's worst session since the 1987 crash,
while oil slid below $70 a barrel for the first time since
August 2007.
Gold sank to one-month lows below $800 as funds dumped
assets in favor of cash after a spate of dire U.S. economic
data darkened the outlook for both corporate earnings and
demand for raw materials.
A broad sell-off in commodities saw declines in copper,
aluminum and grains, with silver and platinum group metals
extending sharp losses to multiyear lows as investors sold on
recession fears.
Major European stock indexes fell about 5.0 percent and
U.S. stocks swung wildly, shedding more than 4.0 percent before
midday after a Federal Reserve survey showed U.S. Mid-Atlantic
factory activity crashed to an 18-year low in October.
Earlier, signs of a looming worldwide economic slowdown led
Japan's Nikkei <> to suffer its worst one-day losses since
the crash of October 1987, slumping 11.4 percent.
U.S. stocks surged in the last hour of trading, a volatile
pattern seen in other recent sessions, as investors snapped up
beaten-down shares a day before stock options expire.
"I think this is bargain hunting and there are some
bargains out there. Some of these stocks are at historic lows,"
said Warren Simpson, managing director at Stephens Capital
Management in Little Rock, Arkansas.
Almost all the stocks in the 30-share Dow rose after all
the components were down earlier in the day.
The 6 percent decline in crude oil, which is now down more
than 50 percent since a July peak of more than $147 a barrel,
helped airline and retail stocks.
The S&P retail index <.RLX> jumped 4.3 percent. Wal-Mart
Stores <WMT.N>, which is not part of the index, rose 9.1
percent.
The Dow Jones industrial average <> closed up 401.35
points, or 4.68 percent, at 8,979.26. The Standard & Poor's 500
Index <.SPX> gained 38.59 points, or 4.25 percent, at 946.43.
The Nasdaq Composite Index <> climbed 89.38 points, or
5.49 percent, at 1,717.71.
The Dow has experienced daily declines or advances of 370
points or more in six of the past nine sessions. Forced selling
is behind much of the volatility, with scant buyers on the
other side of trades, said Andrew Milligan, head of global
strategy at Standard Life Investments in Edinburgh.
"So you're getting these big down days and of course,
sometimes big up days as well, as these different buyers and
sellers oscillate in the marketplace," Milligan said.
Wall Street's choppy session was marked by Citigroup Inc
<C.N> reporting its fourth straight quarterly loss, reflecting
more than $13 billion of loan losses and write-downs for
complex and risky debt. Citigroup shares fell 2 percent.
European stocks ended steeply lower, with oil and financial
companies leading the decline on fears of a global recession.
The FTSEurofirst 300 <> index of top European shares
unofficially ended down 5 percent at 858.41. The top drag on
the European index was Total <TOTF.PA>, followed by HSBC
<HSBA.L>. Total fell 9.2 percent and HSBC 4 percent.
U.S. Treasury bills and long bonds ended weaker in erratic
trading amid concerns about increased borrowing and debt supply
from the government to finance its massive financial bailout.
Two-year notes <US2YT=RR> fell 4/32 in price to yield 1.63
percent, while benchmark 10-year Treasury notes <US10YT=RR>
fell 4/32 in price to yield 3.97 percent. Bond prices and
yields move inversely.
The dollar rose against the yen and euro in choppy trade as
investors sought shelter in dollar-denominated assets.
The dollar rose against a basket of major currencies, with
the U.S. Dollar Index <.DXY> up 0.08 percent at 82.333. The
euro <EUR=> fell 0.10 percent at $1.3447. Against the yen, the
dollar <JPY=> gained 2.01 percent at 101.59.
Oil touched a 15-month low on rising U.S. inventories and
concerns a possible recession would slow demand further.
U.S. crude <CLc1> settled at $69.85 a barrel, down $4.69,
after sliding as low as $68.57, the lowest since June 27,
2007.
In London, front month November Brent crude <LCOX8>, which
expires on Thursday, settled at $66.32 a barrel, down $4.48.
"It's still a demand story," said Amanda Kurzendoerfer,
commodities analyst at Summit Energy in Louisville, Kentucky.
"We saw some very large builds in gasoline and crude oil
for the second week in a row, this confirms the fact that
demand is truly weakening in the United States," she said.
Fear of slowing global demand slammed commodity prices,
driving copper prices down almost 8 percent to a 33-month low,
while spot gold prices tumbled more than 5 percent.
Alan Ruskin, chief international strategist at RBS Global
Banking in Greenwich, Connecticut, said the Philly Fed data
confirmed that the meltdown in financial markets is being
closely followed by a dramatic slide in the economy.
"We have seen weaker Philly Fed data but only fleetingly at
the depths of recessions. Ugly data, more risk aversion,"
Ruskin said.
Spot gold fell to a session low of $786.80 an ounce, before
bouncing back to $801.10 an ounce at midafternoon, down 5.6
percent from Wednesday's nominal close of $848.00.
The economic data overshadowed a decline in most of the
short-term lending rates overnight, indicating that efforts by
central banks to loosen up credit may be working in the key
short-term market.
(Reporting by Ellis Mnyandu, Ellen Freilich and Steven C.
Johnson in New York and Joe Brock, Peter Blackburn and Jan
Harvey in London; Writing by Herbert Lash; Editing by James
Dalgleish)
