* U.S. stocks extends gains, Europe rebounds on oil slide
* Oil slips $6 a barrel on rise in U.S. crude inventories
* Dollar rises as Bernanke discusses currency intervention
(Recasts throughout with U.S. market focus, adds byline;
dateline previous LONDON)
By Herbert Lash
NEW YORK, July 16 (Reuters) - U.S. stocks jumped and
European equities rebounded on Wednesday after oil prices slid
on news of an unexpected leap in U.S. crude supplies last week
and a big U.S. bank posted unexpectedly strong results, easing
investor fears about the bank sector.
Spot gold prices tumbled about 2 percent as oil slid and
the dollar extended gains after Federal Reserve Chairman Ben
Bernanke said currency intervention may be warranted under
certain conditions.
Prices of U.S. government debt fell, after data showed U.S.
consumer price inflation accelerated in June.
U.S. crude oil futures fell more than 4 percent after a
U.S. government agency reported a surprise uptick in import
levels, causing crude prices to tumble for the second day.
Prices for a barrel of oil are down almost $15 over the
past two days, touching a three-week low, and the fall was
enough to help spur a rally on Wall Street, where equity
markets had slipped entirely into a bear market earlier this
week.
All major U.S. stock indexes were trading about 1 percent
higher, and an index of top European shares closed higher, a
day after hitting a three-year closing low.
Stronger-than-expected quarterly results by Wells Fargo
<WFC.N>, the fifth-largest U.S. bank, helped turn a sour mood
on Wall Street that has seen banking shares slide to decade
lows as the sector looks for still more capital after record
infusions.
Wells Fargo raised its dividend by 10 percent despite a 23
percent decline in profit caused by a surge in bad loans, and
its shares surged more than 22 percent to $25.12. Despite the
weak economy, the bank's chief executive, John Stumpf, said
Wells Fargo was "one of the best positioned in financial
services to growth through this adversity."
The results offered a beacon of hope for investors who have
worried about the impact of the credit crisis on the financial
sector.
Before midday, the Dow Jones industrial average <> was
up 102.50 points, or 0.94 percent, at 11,065.04. The Standard &
Poor's 500 Index <.SPX> rose 9.34 points, or 0.77 percent, at
1,224.25. The Nasdaq Composite Index <> was up 32.44
points, or 1.46 percent, at 2,248.15.
European shares turned positive after crude fell and in
response to Bernanke's comments about currency intervention.
The FTSEurofirst 300 <> index of top European shares
closed up 0.44 percent to 1,114.97 points.
BANK OPTIMISM LIFTS DOLLAR
The optimism over results at Wells Fargo helped lift the
dollar against the euro as the bank offered a long-awaited sign
of stability in the U.S. financial system.
"The dollar is likely to benefit only marginally at this
point from economic data. On the other hand, if banks' earnings
come on the positive side, we may see a stronger dollar," said
Omer Esiner, market analyst at Ruesch International in
Washington.
The dollar extended gains after Bernanke told lawmakers
that currency intervention is "something that should be done
only rarely, but there may be conditions in which markets are
disorderly where some temporary action may be justified."
The dollar rose against major currencies, with the U.S.
Dollar Index <.DXY> up 0.37 percent at 71.968. Against the yen,
the dollar <JPY=> fell 1.30 percent at 104.76.
The euro <EUR=> fell 0.38 percent at $1.5843.
Investors had a mixed reaction to a larger-than-expected
jump in U.S consumer prices for June, the largest rise since
September 2005, given that it increased uncertainty about the
outlook for higher interest rates even as the economy slows.
Bonds prices fell. The U.S. 30-year Treasury bond
<US30YT=RR> fell 2 full points to yield 4.59 percent.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
24/32 to yield 3.92 percent.
In commodities markets, oil futures fell after U.S.
government data showed U.S. crude oil stocks rose 3 million
barrels last week. Analysts had predicted a fall of 2.1 million
barrels.
U.S. light sweet crude oil <CLc1> fell $4.57 to $134.17 per
barrel.
Spot gold prices <XAU=> fell $8.85 to $962.85.
(Reporting by Ellis Mnyandu, Richard Valdmanis, Nick Olivari,
Vivianne Rodrigues, John Parry and Richard Leong in New York
and Jane Merriman in London; Writing by Herbert Lash; Editing
by Leslie Adler)
