* Nasdaq gains but S&P 500, Dow shed gains at market close
* U.S. dollar falls vs euro, yen after low inflation data
* U.S. debt reverses early gains to fall on tame CPI
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, June 17 (Reuters) - Oil rebounded on Wednesday on
a drop in U.S. crude supplies while the U.S. dollar fell after
tame U.S. inflation data dampened speculation the Federal
Reserve would raise interest rates anytime soon.
Most markets turned course during the session, with
commodities eking out slight gains after earlier trading lower
and government debt prices snuffed a sharp five-day day rally
to end the session lower.
Broad U.S. stock markets also tried to turn course and
close higher, with the Nasdaq ending up. But the Dow and S&P
500 edged lower at the close of trading, held back by a broad
debt ratings downgrade from Standard & Poor's on 18 banks.
For much of the session traders worried that hopes for a
swift global recovery were premature. Government debt rose on
both sides of the Atlantic after the tame U.S. inflation data,
but Treasuries ended with losses.
Oil gained on an upward swing in U.S. inventories and after
the oil minister from Qatar said the Organization of Petroleum
Exporting Countries was unlikely to hike output soon.
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The Dow Jones industrial average <> closed down 7.49
points, or 0.09 percent, to close unofficially at 8,497.18 and
the Standard & Poor's 500 Index <.SPX> fell 1.26 points, or
0.14 percent, to 910.71.
But the Nasdaq Composite Index <> gained 11.88 points,
or 0.66 percent, to finish at 1,808.06.
"People seem to be selling financials and getting into tech
and biotech," said Neil Massa, senior U.S. trader at MFC Global
Investment Management in Boston.
"Banks are down on the S&P downgrade, but also people are
taking profits because (banks) have had such a great run."
U.S. crude <CLc1> settled 56 cents higher at $71.03 a
barrel, having earlier traded down to $69.00. Brent crude
<LCOc1> rose 61 cents to settle at $70.85 a barrel.
U.S. government debt ended with losses.
"The big increase that we saw in prices earlier was a bit
overstated, so I'm not surprised to see a retracement," said
Mary Ann Hurley, a senior trader at D.A. Davidson & Co. in
Seattle.
Benchmark 10-year notes <US10YT=RR> slipped 9/32 in price
to yield 3.68 percent. They had been up as much as 16/32 in
price in earlier trading.
Inflation data for May affirmed expectations that benchmark
U.S. interest rates will remain low for some time, a relief to
investors worried about a recent surge in Treasury yields.
Gold futures reversed initial losses to end higher, but the
biggest drop in nearly 60 years in consumer prices over the
past 12 months limited gains. Inflation rose a meager 0.1
percent in May.
The August gold contract <GCQ9> settled up $3.80 at $936 an
ounce in New York.
Amid doubts about economic recovery, benchmark dollar bank
lending rates set record lows on Wednesday in an environment of
easier credit conditions with few disruptions seen in the
interbank market before the end of June.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> down 0.61 percent at 80.255.
Against the yen, the dollar <JPY=> fell 0.74 percent at 95.66.
Drugmakers and telecoms stocks also gained in Europe, but
commodity-related stocks pulled a leading index of regional
shares down for the fourth consecutive day.
The FTSEurofirst 300 <> index of top European shares
fell 1.9 percent to a month low of 845.76 points, but remains
up 1.7 percent year-to-date.
Most Asian stocks fell for a fourth day, weighed by
resource-related shares and doubts about a global recovery. The
MSCI index of Asia Pacific shares outside Japan <.MIAPJ0000PUS>
was down 1.5 percent. Japan's Nikkei share average <> rose
0.9 percent on bargain hunting.
(Reporting by Chuck Mikolajczak, Gertrude Chavez-Dreyfuss,
Richard Leong in New York; Dominic Lau, Ian Chua, Joe Brock,
Alex Lawler, Maytaal Angel and Michael Taylor in London and
Peter Starck in Frankfurt; writing by Herbert Lash; Editing by
Leslie Adler)
