* Negative sovereign credit rating actions curb risk trade
* US stocks edge higher as US dollar halts 3-day advance
* Treasuries sell off after poor 10-year note auction
(Updates with U.S. markets close)
By Walter Brandimarte
NEW YORK, Dec 9 (Reuters) - The U.S. dollar's three day
rally stalled on Wednesday, encouraging foreign investors to
buy some Wall Street stocks late in the day, but a series of
negative sovereign credit rating actions across Europe and the
Middle East dampened demand for high-yielding assets.
Commodity prices fell as investors became less willing to
take on risk, with U.S. crude oil futures ending at a two-month
low.
European shares closed at their lowest in more than a week
after Standard & Poor's warned it could downgrade Spain's
AA-plus sovereign credit rating, one day after Fitch decided to
cut Greece's rating to BBB-plus. For details, see
[].
Adding to global credit fears, Moody's announced it was
reviewing the ratings of issuers related to the government not
just of Dubai but of neighboring emirate Abu Dhabi, as well as
the federal government of the seven-member United Arab Emirates
federation.
"The real issue is what this could do as countries turn to
their taxpayers to raise revenue in order to protect their
credit worthiness," said Kevin Caron, market strategist at
Stifel, Nicolaus & Co in Florham Park, New Jersey.
"This could mean higher tax rates when we have to pay for
the stimulus, and that would hurt growth going forward."
U.S. stocks staged a late rebound, however, as the
government's decision to extend the $700 billion financial
bailout fund, or TARP, until October 2010 boosted shares of
banks. []
The Dow Jones industrial average <> gained 51.08
points, or 0.50 percent, at 10,337.05, while the Standard &
Poor's 500 Index <.SPX> ended up 4.01 points, or 0.37 percent,
at 1,095.95. The Nasdaq Composite Index <> rose 10.74
points, or 0.49 percent, to 2,183.73.
A CNBC report saying that Citigroup Inc. <C.N> plans to pay
back TARP funds by raising cash in an equity offering also
supported investor optimism, although shares of the bank closed
1.3 percent lower. []
"Weakness in the dollar late in the day, coupled with news
that Citigroup is going to payback their TARP assistance, both
have given the market a little bit of support," said Peter
Kenny, managing director at Knight Equity Markets in Jersey
City.
In Europe, however, the FTSEurofirst 300 <> index
ended down 1.0 percent, the lowest close since Nov. 30. The
benchmark indicator is still up 20 percent this year and has
surged 54 percent since hitting a record low in early March.
The MSCI all-country world stock index <.MIWD00000PUS> lost
0.27 percent, while an emerging market stocks index <.MSCIEF>
fell 0.68 percent.
Prices of raw material also fell investors became more
cautious and scaled down the recent "risk trade" which consists
of buying stocks and commodities.
U.S. light crude oil <CLc1> closed down $1.95, or 2.69
percent, to $70.67 per barrel, while spot gold prices <XAU=>
were practically stable at $1,128.60 an ounce, after after
hitting its lowest level in more than three weeks during the
session, at 1,117.60.
The Reuters/Jefferies CRB Index <.CRB> of 19 commodities
futures was down 1.53 percent.
DOLLAR HALTS GAINS
The U.S. dollar halted a three-day winning streak as
investors concluded the recent rally is overdone.
The greenback was down against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
down 0.38 percent.
Against the Japanese yen, the dollar <JPY=> was down 0.61
percent at 87.86. The euro <EUR=> was up 0.17 percent at
$1.4723, however.
"Neither of these developments, Spain or Greece and their
sovereign credit ratings, can be interpreted as good for the
euro," said Joseph Trevisani, chief market analyst at FX
Solutions in Saddle River, New Jersey.
"But the market has known about these things for some time
so there won't be too big a reaction."
Prices of U.S. Treasuries also fell, despite some safety
bid, after a sale of $21 billion in 10-year notes attracted
poor investor demand.
Analysts said the deal suffered from bad timing, given many
professional investors are unwilling to commit funds for longer
periods this close to the year-end.
The benchmark 10-year Treasury note <US10YT=RR> was down
13/32, with the yield at 3.44 percent, compared with 3.39
percent late Tuesday. The 30-year Treasury bond <US30YT=RR> was
down 21/32, with the yield at 4.42 percent against 4.37 percent
late Tuesday.
(Additional reporting by Ryan Vlastelica, Nick Olivari, Burton
Frierson and Richard Leong;)
