* U.S. stocks slide at close as bank worries in focus
* Euro rises against dollar after early stock rally
* U.S., euro zone government debt eases, safety bid wanes
* Oil rises in late-day surge despite rising inventories
(Adds close of U.S. markets)
By Herbert Lash
NEW YORK, April 22 (Reuters) - The dollar and most U.S.
stocks fell on Wednesday as investors turned cautious after
disappointing results at Morgan Stanley revived concerns about
the banking sector and the IMF's gloomy global growth forecast
curbed risk aversion.
Higher equity prices for most of the session had dampened
enthusiasm for government debt, and the International Monetary
Fund's latest outlook that the world economy has fallen into a
severe recession curbed the appeal of oil.
The Washington-based institution said its revised global
outlook stems from assumptions that financial markets will take
longer than previously expected to stabilize. For more see
[]
Record first-quarter profit of $3.1 billion at Wells Fargo
<WFC.N> and rising U.S. home prices in February helped Wall
Street and European shares to rebound soon after Wall Street
opened and stay in positive territory almost all day.
But analysts questioned the strength of corporate earnings
despite strong results at Boeing <BA.N>, Northrop Grumman
<NOC.N> and McDonald's <MCD.N>, among others, and stocks
slipped just before markets closed.
"Investors are trying to decide which way to jump," said
Wells Fargo currency strategist Nick Bennenbroek. "The question
is whether to bet on a more sustained recovery in financial
markets or position for a renewed risk aversion."
The Dow Jones industrial average <> fell 82.99 points,
or 1.04 percent, at 7,886.57. The Standard & Poor's 500 Index
<.SPX> shed 6.53 points, or 0.77 percent, at 843.55. The Nasdaq
Composite Index <> rose 2.27 points, or 0.14 percent, at
1,646.12.
The Nasdaq eked out a gain after AT&T <T.N> reported a
profit that fell less than expected, and U.S. biotech shares
got a lift from Gilead Sciences <GILD.O>, whose quarterly
profit beat estimate.
Trade was choppy as investors tried to reassess the outlook
for equities, a major driver of market sentiment, after six
straight weeks of gains.
Apple Inc <AAPL.O> reported forecast-beating earnings after
the market closed and its shares jumped in extended trade.
European shares recovered on Wells Fargo's results after
slipping earlier on Morgan Stanley's <MS.N>
bigger-than-expected loss.
The FTSEurofirst 300 <> index of top European shares
closed 1 percent higher at 795.24 after falling as much 1.4
percent.
Morgan Stanley rekindled concerns whether the financial
system had recovered enough to lead the United States out of
what is set to become the longest U.S. post-war recession next
month.
"I don't think the financial stocks need to lead the market
but there needs to be a feeling that the financial system is
sound enough to provide a base for the economy and other
sectors for the market to go forward," said David Scott, chief
investment officer at Chase Investment Counsel in
Charlottesville, Virginia. "I don't think we're there yet."
In a clear sign of the uncertainty hanging over markets,
oil prices rebounded late in the day even as energy inventories
in the United States continue to rise.
U.S. crude <CLc1> settled up 30 cents at $48.85 a barrel,
after trading down to $47.70 earlier. London Brent crude
<LCOc1> settled 1 cent lower at $49.81 a barrel.
"The oil market refuses to go lower despite terrible
inventory data," said Tom Bentz, analyst at BNP Paribas
Commodity Futures Inc. "This has been the case for months."
U.S. Energy Information Administration data showed a 3.9
million barrel rise in crude oil stocks last week, more than
the 2.6 million barrel rise analysts had forecast. []
Gasoline and distillate stocks also rose unexpectedly.
The early rebound in equities, and a sell-off in the
British pound, contributed to gains in the euro.
As with government debt, "the correlation with equities is
very strong," said Dan Cook, a senior market analyst at IG
Markets Inc in Chicago. "With any improvement in share prices
we also see a bit of a return to risk."
The euro <EUR=> gained 0.50 percent at $1.2998.
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index <.DXY> off 0.22 percent at 86.307.
Against the yen, the dollar <JPY=> fell 0.75 percent at 97.91.
Steep losses in gilts after British finance minister
Alistair Darling announced record government borrowing for
2009/10 in his budget statement weighed on German bunds.
With little in the way of economic data, Treasury auctions
or Federal Reserve debt purchases, bond investors looked to
equities for direction.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
12/32 in price to yield 2.95 percent. The 2-year U.S. Treasury
note <US2YT=RR> fell 2/32 in price to yield 0.97 percent.
Gold ended higher on the weaker dollar and physical demand
firmed in top consumer India ahead of the Akshaya Tritya
festival on April 27, a key time for gold buying.
U.S. gold futures for June delivery <GCM9> settled up $9.80
at $892.50 an ounce in New York.
(Reporting by Chuck Mikolajczak, Matthew Robinson, Vivianne
Rodrigues, Chris Reese in New York; Atul Prakash and Ian Chua
in London; writing by Herbert Lash; Editing by Leslie Adler)
