* Bargain hunters emerge for Goldman Sachs shares
* Guidance from Bernanke triggers appetite for risk-taking
* But 2-year Treasury yield hits record low of 0.5764 pct
(Updates with U.S. markets close)
By Jennifer Ablan
NEW YORK, July 20 (Reuters) - World stocks staged a
late-day surge to end higher on Tuesday and Treasury prices
pared gains, reversing steep losses as bargain hunters emerged
amid speculation the Federal Reserve will take steps to spur
lending.
For much of the day, investors had been focused on
lower-than-estimated revenues at major U.S. companies and a
drop in U.S. housing starts intensified worries the economic
recovery was losing momentum.
Goldman Sachs Group Inc. <GS.N>, Johnson & Johnson
<JNJ.N>, International Business Machines Corp. <IBM.N> and
Texas Instruments Inc. <TXN.N> have posted quarterly revenues
that fell shy of expectations against the backdrop of
disappointing economic news.
Late Tuesday, investors bought the beaten-down shares of
Goldman, driving them up 2.2 percent to settle at $148.91.
Goldman, the heavyweight investment bank, said its
earnings slid 82 percent in the second quarter, hampered by
its settlement with the U.S. Securities and Exchange
Commission and the UK's payroll tax. Profit dropped to $613
million from $3.44 billion, while revenue slid 36 percent to
$8.84 billion. For more details see []
Market sentiment also moved in sympathy with U.S. markets
on speculation over what Federal Reserve Chairman Ben Bernanke
could announce in his semi-annual congressional testimony on
Wednesday, including the possibility of a further loosening of
monetary policy.
"The market is getting a boost here on a story from
somewhere that the Fed is going to announce that they will
stop paying interest on reserves where they are currently
paying .25 percent," Peter Boockvar, equity strategist at
Miller Tabak & Co. in New York, wrote in an email to clients.
"This would be the Fed's attempt to force banks to lend money
instead of parking it at the Fed. In my opinion, this is the
last bullet in the gun of the Fed and therefore is not going
to be used so soon."
The Dow Jones industrial average <> rose 75.53 points,
or 0.74 percent, to close at 10,229.96. The benchmark Standard
& Poor's 500 Index <.SPX> advanced 12.23 points, or 1.14
percent, to end at 1,083.48. The Nasdaq Composite Index
<> climbed 24.26 points, or 1.10 percent, to 2,222.49.
That said, investors still hedged themselves with exposure
to gold, as the yellow metal rose more than 1 percent to top
$1,190 an ounce.
Economic data on housing has continued to curb optimism of
a strong recovery.
U.S. housing starts hit their lowest level in eight months
in June, but a rise in building permits offered hope that home
building was poised to pick up.
The Commerce Department said on Tuesday housing starts
dropped 5.0 percent to a seasonally adjusted annual rate of
549,000 units, the lowest since October. It was the second
straight month of declines in groundbreaking activity and was
well below market expectations for a 580,000-unit rate.
World stocks as measured by MSCI <.MIWD00000PUS> rose 0.45
percent and the Thomson Reuters global stock index
<.TRXFLDGLPU> also climbed 0.45 percent.
European stocks broke a week-long losing streak as mining
stocks climbed along with metal prices. Spanish stocks such as
Santander <SAN.MC> also rallied, helped by Spain's successful
Treasury bill auction that eased worries over the country's
ability to tap the debt market.
The FTSEurofirst 300 <> index of top European shares
closed 0.04 percent higher at 1,006.64 points.
But Japan's benchmark Nikkei stock index <> shed 1.15
percent, reflecting investor concern about a U.S. slowdown.
Investor sentiment was also undermined when Hungary sold
less of its debt than expected, days after its talks with
international lenders were suspended.
EURO TAKES A BREATHER
The euro was lower, reversing a climb to its highest
against the dollar in more than two months.
It retreated from $1.3029 hit on trading platform EBS as
some investors questioned whether the single currency would
sustain gains above $1.30, given that European bank stress
test results due on Friday may reveal weakness in euro-zone
financial institutions.
The poor demand at Hungary's debt offer also stung the
euro as it weighed on risk sentiment.
"We've seen risk appetite claw back a fair amount, and the
market is questioning whether that move is valid," said Jane
Foley, director of research at Forex.com.
In New York trading, the euro <EUR=> was down 0.39 percent
at $1.2889 from a previous session close of $1.2940.
The dollar was higher against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
up 0.31 percent at 82.766 from a previous session close of
82.513. Against the Japanese yen, the dollar <JPY=> was up
0.80 percent at 87.42 from a previous session close of
86.730.
U.S. Treasury debt prices were higher, with the yield on
the two-year note touching a record low.
The two-year Treasury note <US2YT=RR> yield briefly hit a
low of 0.5764 percent, according to Reuters data. It was last
yielding 0.58 percent, down from 0.60 percent late on Monday.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
up 1/32, with the yield at 2.96 percent, while the 30-year
U.S. Treasury bond <US30YT=RR> was down 2/32, with the yield
at 3.98 percent.
Gold also gained on the day. Spot gold prices <XAU=> rose
$8.80, or 0.74 percent, to $1,192.00. The Reuters/Jefferies
CRB Index <.CRB> was up 0.32 of a point, or 0.12 percent, at
261.52.
(Additional reporting by Emily Flitter in New York and Tamawa
Desai, Naomi Tajitsu and Harpreet Bhal in London; Editing by
Jan Paschal)
