(Adds U.S. market close)
By Herbert Lash
NEW YORK, Feb 26 (Reuters) - U.S. stocks rallied on
Tuesday, buoyed by news of a $15 billion buyback plan from IBM
and remarks by a top Federal Reserve official suggested the
further interest rate cuts by the U.S. central bank, which sent
dollar to a record low against the euro.
The greenback also fell to a lifetime low versus a basket
of currencies and crude oil surged over $101 a barrel to a
record settlement as investors reacted to the weak dollar,
battered by a fresh batch of gloomy U.S. economic data.
Gold and other metals rebounded from the weak close on
Monday as investors continued to put money into commodities
amid rising inflation concerns as U.S. producer prices posted
the biggest 12-month gain in more than 26 years.
In Europe, stocks closed higher after forecast-beating
results from Standard Chartered Bank <STAN.L> drove gains in
financial shares.
U.S. stocks also gained on an improved outlook on top bond
insurers MBIA Inc <MBI.N> and Ambac Financial Group Inc
<ABK.N>, and the debt they guarantee.
The Dow Jones industrial average <> was up 114.70
points, or 0.91 percent, at 12,684.92. The Standard & Poor's
500 Index <.SPX> was up 9.50 points, or 0.69 percent, at
1,381.30. The Nasdaq Composite Index <> was up 17.51
points, or 0.75 percent, at 2,344.99.
Moody's Investors Service ended its immediate threat to cut
the AAA rating of MBIA's insurance unit, staving off the
prospect of more bank losses that have hung over financial
markets like the sword of Damocles.
Financial institutions, already heavily hit by the credit
crisis, face a further $70 billion of write-downs if bond
insurers' ratings are cut, according to Oppenheimer & Co.
"When you look at the AAA ratings (on bond insurers) being
confirmed, that gave people confidence we might not have much
more downside in financials," said Michael James, senior trader
at regional investment bank Wedbush Morgan in Los Angeles.
U.S. stocks reversed losses after International Business
Machines Corp <IBM.N> announced its buyback program, offsetting
data that showed a plunge in consumer confidence and more bad
news from the beleaguered housing market.
Energy shares jumped on the rise in crude oil
prices.
BANK RESULTS, BOND HOPES DRIVE EUROPE
In Europe, Standard Chartered's results and its forecast
for another strong year drove its shares up almost 8 percent
and boosted shares of other banks.
Growing investor conviction that a rescue package for top
U.S. bond insurers may be imminent also pushed European shares
higher.
The FTSEurofirst 300 index <> ended up 1.41 percent
at 1,361.18 points, close to its day's high. Advancing issues
outnumbered decliners by about 4.4 to one.
Japanese stocks gave up early gains to end lower after a
six-week closing high on Monday. The Nikkei average <>
fell 0.7 percent to end at 13,824.72.
Global bank HSBC Holdings Plc <0005.HK> led Hong Kong blue
chips up nearly 2 percent on signs the world's largest bond
insurers would stabilize, easing concerns about
subprime-related losses at the biggest banks.
EURO AT NEW PEAK ON RATE OUTLOOK
The euro surged to $1.4982 <EUR=>, according to Reuters
data, beating the previous all-time peak of $1.4966 touched on
Nov. 23. The dollar index, which tracks the greenback's
performance against six major currencies, also touched a
life-time low of 74.706 <.DXY>.
The vice chairman of the Federal Reserve, Donald Kohn,
speaking in North Carolina, said the danger the U.S. economy
will weaken further is a bigger worry than higher inflation. He
said the Fed is ready to respond as needed to "difficult
times."
Kohn's comments suggested the Fed will cut interest rates
further, pushing the dollar to extend losses.
Strong U.S. and European demand for heating fuel in the
midst of a cold spell and signals from the Organization of
Petroleum Exporting Countries that it will not raise output at
its meeting next week helped support the rally in crude oil.
April crude <CLJ8> rose 1.66 percent to settle at a record
$100.88 a barrel in New York, up $1.65 and beating the previous
peak of $100.74 hit on Feb. 20.
London Brent crude <LCOc1> rose $1.98 to a record for the
European benchmark of $99.67.
"The weak dollar seems to be the biggest catalyst for this
boost," said Mark Waggoner, president of Excel Futures Inc in
Huntington Beach, California.
U.S. Treasury prices rose on Tuesday as fears about the
deteriorating economy and an unwillingness to take risks gained
an edge over worries about rising inflation.
New York gold and silver futures finished sharply higher,
fueled by a combination of a crude oil rally, a sliding dollar
and the report of rising U.S. producer prices.
The gold contract for April delivery at the COMEX division
of the New York Mercantile Exchange <GCJ8> settled up $8.40 at
$948.90 an ounce, trading between $928.90 and $953.20.
The April contract had scaled a record high of $958.40 on
Thursday last week.
The record finish of crude oil futures increased gold's
appeal as a hedge against inflation.
(Additional reporting by Caroline Valetkevitch, Lucia
Mutikani, Walden Siew, Frank Tang, Gene Ramos and Robert
Gibbons in New York; Editing by Leslie Adler)
