By Jonathan Oatis
NEW YORK, Jan 28 (Reuters) - Wall Street stocks rose and
the dollar fell against most major currencies on Monday amid
expectations that the Federal Reserve will cut interest rates
again this week in an effort to head off a U.S. recession.
"There's hope that (Fed Chairman) Ben Bernanke will do more
on Wednesday," said Alan Lancz, president of the Alan B. Lancz
and Associates Inc investment advisory firm in Toledo, Ohio.
"Last week's ... cut was a nice turnaround and some kind of
follow-through will be good too."
Anticipation of a Fed rate cut -- and the resulting
stimulus for the U.S. economy -- also helped push up oil
prices.
U.S. Treasury debt prices fell, boosting yields, on the
back of stronger stocks and a lackluster government bond
auction that prompted profit-taking from recent safe-haven
gains.
Gold prices rose to record highs on the weakness in the
dollar as well as a power shortage in South Africa, a major
supplier of the yellow metal.
U.S. stock indexes ended higher in a volatile session that
opened with shares falling. According to preliminary figures,
the Dow Jones industrial average <> closed up 176.72
points, or 1.45 percent, at 12,383.89. The Standard & Poor's
500 Index <.SPX> ended up 23.24 points, or 1.75 percent, at
1,353.85 and the Nasdaq Composite Index <> was up 23.71
points, or 1.02 percent, at 2,349.91.
The rise in U.S. stocks contrasted with slumps in Europe
and Asia. The pan-European FTSEurofirst 300 index <>
plunged up to 2.48 percent before ending the day down 1.0
percent at 1,317.15 points, pressured by worries about the
economy and fallout from the Societe Generale <SOGN.PA> trading
scandal. In Asia, the Nikkei 225 index <> finished down
nearly 4 percent at 13,087.91.
On Tuesday, the Fed begins a two-day meeting on rates, one
week after the central bank made an aggressive cut of
three-quarters of a percentage point in its benchmark federal
funds rate. The cut was a surprise because it came between
regularly scheduled meetings.
Most Wall Street observers expect the Fed to cut the rate
by half a percentage point, which would put the fed funds rate
at 3 percent.
Shortly after Wall Street stock markets opened, the
government reported sales of new single-family homes slid 26
percent last year and fell last month to their lowest rate in
13 years, an unexpectedly large decline. For details, see
[]
Related crises in the U.S. housing market and the subprime
mortgage sector and its aftermath -- a credit crunch and big
losses for major banks -- have topped America's economic
worries.
While Fed cuts and a planned $150 billion economic stimulus
package are aimed at averting a recession or easing its blows,
the rate reductions reduce the appeal of the dollar for
investors looking for attractive yields.
The euro rose 0.7 percent to $1.4774 <EUR=>, rising for the
fourth session out of the last five. Against the Swiss franc,
the dollar was down 0.7 percent at 1.0897 francs <CHF=>.
Against the yen, the dollar was near flat at 111.33 yen
<JPY=>.
In Treasuries, an auction of U.S. two-year government notes
added weight to a debt market that has been retreating in fits
and starts since two-year yields tumbled last week to their
lowest levels since the first half of 2004.
Two-year note prices fell, pushing yields up to 2.24
percent <US2YT=RR>. Benchmark 10-year Treasury notes also fell,
for a yield of 3.61 percent. Bonds yields move inversely to
prices.
Oil futures rose after dropping more than a dollar on early
profit-taking. U.S. crude <CLc1> settled up 28 cents at $90.99
a barrel. In London, Brent crude <LCOc1> was up 48 cents at
$91.38 a barrel.
In the precious metals markets, spot gold <XAU=> hit a
historic high of $929.20 per ounce before paring gains slightly
to stand at $927.50/928.20 an ounce against $913.00/914.00 on
Friday.
