(Adds close of U.S. markets, changes byline)
* U.S. stocks gain after Fed leaves rates unchanged
* Oil falls more than $2 a barrel on inventory build
* Dollar falls to 2-week low against euro after Fed move
By Herbert Lash
NEW YORK, June 25 (Reuters) - U.S. stocks rose on Wednesday
after investors' inflation worries were soothed by a solid drop
in oil prices and the Federal Reserve concluded its regular
meeting with a statement that was not viewed as overly
hawkish.
The Fed's widely expected decision to leave the federal
funds rate at 2 percent accelerated selling of the dollar,
which fell to two-week lows versus the euro.
U.S. government debt prices initially fell but
shorter-dated issues later reversed course as traders scaled
back expectations for a rate hike at the Fed's next meeting in
August.
Oil fell more than $2 after U.S. weekly data showed crude
inventories in the world's top consumer rising as high fuel
prices have continued to erode demand.
Late in the session, the Dow industrials briefly turned
negative, dragged lower by a steep decline in Boeing Co <BA.N>
after Goldman Sachs recommended investors sell the
aircraft-maker's stock.
Boeing shares fell 6.9 percent to $69.64.
Beaten-down financial shares benefited from deal making and
bargain hunting, but the buoyant mood in stocks hurt U.S. and
euro zone government bond prices.
The Dow Jones industrial average <> closed slightly
higher, up 4.40 points, or 0.04 percent, at 11,811.83. The
Standard & Poor's 500 Index <.SPX> rose 7.68 points, or 0.58
percent, at 1,321.97. The Nasdaq Composite Index <> added
32.98 points, or 1.39 percent, at 2,401.26.
In Europe, the pan-European FTSEurofirst 300 <> index
ended 1.1 percent higher at 1,227.65 points. Banks were the top
weighted gainers, with an $8.9 billion rights offering by
Barclays <BARC.L>, Britain's No. 3 bank, lifting the sector.
Barclays' said it was raising the capital through a
discounted share issue in which Qatar Investment Authority, the
country's sovereign wealth fund, and Japan's Sumitomo
MitsuiBanking <8316.T> will be major investors.
Signs that the world's major banks are clearing up their
troubles from the credit crisis and raising new capital come at
a time when the global economy faces the threat of rising
prices from surging oil and commodity prices.
Oil prices fell after the Energy Information Administration
reported U.S. crude oil inventories rose by 800,000 barrels to
301.8 million barrels in the week to June 20, countering
expectations of a draw.
The inventory buildup came as U.S. gasoline demand, which
has fallen as high fuel prices force motorists to adjust their
driving habits, dipped 2.1 percent over the past four weeks
compared with year-ago levels.
U.S. crude <CLc1> settled down $2.45 to $134.55 a barrel.
London Brent crude <LCOQ8> fell $2.13 to settle at $134.33.
U.S. gold futures extended early weakness to close 1
percent lower on falling energy prices.
The August contract <GCQ8> for gold in New York settled
down $9.30 at $882.30 an ounce.
U.S. economic data did nothing to dispel worries over the
state of the world's largest economy.
Durable goods orders were flat last month, despite
expectations for a slight rise, while sales of new single
family homes fell.
The dollar fell against major currencies, with the U.S.
Dollar Index <.DXY> down 0.49 percent at 72.888. Against the
yen, the dollar <JPY=> was down 0.06 percent at 107.77.
The euro <EUR=> was up 0.69 percent at $1.5673.
Bonds would normally benefit from signs of economic
weakness, but were hindered by the strength of stocks.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
2/32 to yield 4.11 percent. The 30-year U.S. Treasury bond
<US30YT=RR> fell 2/32 to yield 4.66 percent.
U.S. gold futures fell sharply to close 1 percent lower on
falling energy prices.
The August contract <GCQ8> for gold in New York settled
down $9.30 at $882.30 an ounce.
The MSCI main world equity index <.MIWD00000PUS> erased
early losses to gain 0.62 percent on the day.
In Tokyo, the stocks' picture was less rosy. Japan's Nikkei
stock average edged down 0.1 percent to a one-month closing low
in its longest losing streak this year.
The Nikkei <> shed 19.64 points to 13,829.92, its
lowest close since May 28. The broader Topix <> lost 0.2
percent to 1,346.08.
(Additional reporting from bureaus across Europe, the U.S.
and Asia)
