(Updates through New York market close, adds quotes, oil
market futures)
By Lynn Adler
NEW YORK, Feb 13 (Reuters) - A surprise rise in U.S.
retail sales for January stoked hopes that the world's largest
economy will be able to avoid a recession, propelling global
stock markets and the dollar higher on Wednesday.
The unexpected 0.3 percent sales gain suggested consumer
spending would hold up, bucking forecasts for monthly cash
register receipts to show their first back-to-back drop in
4-1/2 years. A 0.2 percent sales drop was widely predicted.
Although caution prevails as U.S. economic reports have
been contradictory, many market participants grabbed on to the
sales report as a signal of resilience.
"The consumer is going to be the driver that gets us out of
this recession or slowdown. It is all about the consumer," said
Peter Kenny, managing director at Knight Equity Markets in
Jersey City, New Jersey. "The retail data speak to the fact
that the consumer is still alive." To read more about the
retail sales report, see [].
The Dow Jones industrial average <> jumped 173 points,
or 1.40 percent, to 12,546.23 by the end of the session, driven
up by prospects the U.S. economy would fend off recession.
Industrial companies, which are especially dependent on
economic growth, provided the biggest boost. Technology shares
gained after Applied Materials <AMAT.O>, the largest
chip-making equipment producer, said its earnings surpassed
estimates. To read more on U.S. stocks, please see
[].
On the foreign exchange markets, the dollar rose to a
one-month peak against the yen after the retail sales news.
"On balance, the report is dollar-positive, although I
don't think it changes the outlook for further (Federal Reserve
interest) rate cuts," said Omer Esiner, market analyst at
Ruesch International in Washington, D.C.
In recent weeks, the U.S. central bank has slashed official
short-term interest rates by 1.25 percentage points in two
aggressive cuts to stimulate an economy many feared was sinking
into recession.
Markets were now poised for comments from Fed Chairman Ben
Bernanke, Treasury Secretary Henry Paulson and Securities and
Exchange Commission Chairman Christopher Cox, who will testify
on the state of the U.S. economy and financial markets before
the Senate Banking Committee on Thursday.
The U.S. currency climbed against a basket of major
currencies after the sales report, pushing the dollar index
<.DXY> up 0.1 percent to 76.406. Against the yen, the dollar
rose to a one-month high of 108.37 yen <JPY=> before easing to
108.18. The euro was little changed at $1.4574 <EUR=>.
Robert Sinche, head of liquid products strategy at Bank of
America in New York, said the dollar's rebound would be
short-lived. "We would doubt there's much more upside from
current levels and certainly think these are good opportunities
to be selling some dollars."
Tuesday's news that billionaire investor Warren Buffett had
offered to reinsure $800 billion in municipal debt guaranteed
by bond insurers had helped to soothe worries about further
fallout from the credit crisis, although doubts resurfaced.
Billionaire investor Wilbur Ross, who buys troubled assets
and turns them around, said in a television interview on
Wednesday that he doubted Buffett's plan would go forward. But
he said the proposal could pressure regulators and others to
find another solution for the troubled industry. Read more at
[].
Stronger stock markets and the surprise retail sales rise
pressured government bonds, which are seen as a safe-haven
asset, sending longer-term U.S. Treasury debt yields higher.
Some investors reached for safety in Treasuries after MGIC
<MTG.N>, the largest U.S. mortgage insurer, reported a $1.47
billion quarterly loss that exceeded forecasts as more
homeowners fell behind on payments.
Benchmark 10-year U.S. government note prices slid 14/32,
lifting their yield to 3.72 percent.
In global stock markets, MSCI's main world equity index
<.MIWD00000PUS> rose 0.55 percent after falling in early
trade.
European stocks ended little changed after sharp gains on
Tuesday. Weak telecoms and mining shares offset stronger auto
stocks and the buoyant U.S. retail sales report. The
FTSEurofirst 300 <> index of top European shares closed
up 0.04 at 1,334.25 points.
Earlier, Japan's Nikkei <> edged up 0.4 percent, while
MSCI's measure of other Asian stock markets <.MIAPJ0000PUS>
slipped 0.4 percent.
Strong gasoline futures and ongoing worries over a legal
battle between Venezuela and Exxon Mobil boosted U.S. crude oil
futures. Crude and gasoline futures climbed despite weekly
government figures showing inventory increased last week.
March crude oil <CLH8> rose 42 cents, or 0.45 percent, to
$93.20 a barrel on the New York Mercantile Exchange.
(Additional reporting by Jennifer Coogan, Chris Reese,
Robert Gibbons, Nick Olivari in New York, Editing by Chizu
Nomiyama)
