(Adds U.S. market close)
By Herbert Lash
NEW YORK, Feb 20 (Reuters) - Wall Street stocks rose on
Wednesday after a U.S. Federal Reserve forecast of possible
lower interest rates and strong profits at Hewlett-Packard Co
<HPQ.N> helped investors overcome worries about a rise in
monthly U.S. consumer prices.
The inflation report further unsettled markets upset
already this week by a leap in U.S. crude oil futures to a
record high above $100 on Tuesday. The energy market climbed
again on Wednesday and gold, a traditional inflation hedge,
rose sharply to a record high in late trade.
The release of minutes from a Fed policy-setting meeting in
January during the afternoon caused stocks, bonds and the
dollar to see-saw in choppy trading as investors weighed the
Fed's forecast of a weakening economy but a lowering of rates.
All three markets reversed course on expectations the Fed
will keep easing despite the signs of inflation seen in the
consumer prices.
"Basically I think they are clearing the way for more
easing," said Carl Lantz, U.S. interest rate strategist at
Credit Suisse in New York. "They acknowledged that they have
done a lot but they still saw downside risks to growth."
At the unofficial early close, the Dow Jones industrial
average <> was up 93.29 points, or 0.76 percent, at
12,430.51. The Standard & Poor's 500 Index <.SPX> was up 11.19
points, or 0.83 percent, at 1,350.91. The Nasdaq Composite
Index <> was up 20.90 points, or 0.91 percent, at
2,327.10.
The dollar erased gains against the euro to trade flat and
U.S. Treasury debt prices ended mixed after the stock market
rally dimmed the safe-haven appeal of bonds.
The sharp market reversals surprised investors.
U.S. consumer prices increased on an annual basis to an
unexpectedly strong 4.3 percent in January from an already
elevated rate of 4.1 percent the month before, the U.S. Labor
Department said. Rising food costs helped push consumer prices
up for a second straight monthly gain of 0.4 percent.
Investors took heart in results released after markets
closed on Tuesday by Hewlett-Packard Co <HPQ.N>, which issued a
forecast above of Wall Street targets. It gained nearly 8
percent in value to close at $47.44.
HP's better-than-expected earnings showed it's able to
navigate a difficult economy due partly to strong sales from
abroad, which account for more than two-thirds of its revenue.
Earlier in Europe stocks fell on U.S. inflation concerns
and fresh worries about bank write-downs at Britain's Alliance
& Leicester <ALLL.L> and BNP Paribas <BNPP.PA>, France's
largest listed bank, for exposure to the U.S. housing crisis.
BNP Paribas' fourth-quarter net profit fell 42 percent to
1.006 billion euros ($1.5 billion), in line with previous
guidance, and said it took write-downs of 898 million euros
during the quarter.
A&L, Britain's seventh-biggest listed bank, reported a
gloomy outlook and surprised investors with a warning about
rising funding costs.
The FTSEurofirst 300 index <> of top European shares
ended down 1.2 percent at an unofficial 1,322.18 points.
Declining issues outnumbered advancers by four to one.
Euro-zone government bond yields and implied interest rates
edged up after a media report suggested the European Central
Bank won't ease policy this year as much as markets expect, a
view given credence by a German steelworkers wage deal.
The price on U.S. benchmark 10-year notes <US10YT=RR> was
flat at 96-22/32 after posting an earlier high of 97-4/32.
Ten-year yield last traded 3.90 percent, little changed on the
day.
U.S. oil <CLc1> vaulted to record of $101.32 a barrel and
settled up 73 cents at $101, a closing record, as OPEC supply
concerns and hedge fund buying countered worries about the U.S.
economy.
The gains extended a record rally that sent crude to over
$100 on Tuesday on expectations the Organization of Petroleum
Exporting Countries will hold output levels steady or even
reduce them when it meets next month.
London Brent <LCOc1> settled 14 cents lower at $98.42 a
barrel.
The euro <EUR=> was down 0.12 percent at $1.4707 from a
previous session close of $1.4725. Against the Japanese yen,
the dollar <JPY=> was up 0.38 percent at 108.17 from a previous
session close of 107.76.
(Editing by Richard Satran)
