(Updates to New York close)
* U.S. stocks succumb to bleak outlook U.S. data paints
* Dollar falls; U.S. consumer confidence at 16-year low
* Bond prices rise as consumer sentiment slides in June
* Oil rises on Iranian tensions, fear of Nigeria strike
By Herbert Lash
NEW YORK, June 24 (Reuters) - The dollar and U.S. stocks
slipped on Tuesday and bond prices rose after bleak U.S.
housing and consumer confidence data provided investors with
the latest signs of U.S. economic weakness.
Oil prices closed with modest gains at the $137 a barrel
level on concerns over Nigerian supply disruptions and rising
tensions between Israel and Iran. Crude hit its high for the
day on market rumors of an attack on nuclear sites in Iran,
whose government denied that anything had taken place.
U.S. stocks slipped in late trading after a midday rally in
battered financial shares spurred a rebound and pushed the Dow
and broad S&P 500 into positive territory.
European stocks also trimmed losses late in the session
with banks recovering minutes before the closing bell, although
worries over the U.S. economy kept the overall market in the
red. Banks were steadier in U.S. trading as well.
"You're seeing the bounce in financials. The regionals, in
particular, have gotten pretty cheap as they've been sold hard
recently and some of them are actually in relatively good
shape," said Warren Simpson, managing director at Stephens
Capital Management in Little Rock, Arkansas.
"But I'd be cautious here: just look at consumer confidence
and housing," Simpsons said.
Trading volumes remained thin as investors waited to see
the Federal Reserve's statement on Wednesday at the conclusion
of its regular two-day policy meeting. The U.S. central bank is
expected to leave rates on hold at 2 percent, ending a string
of cuts aimed at blunting the impact of the credit crisis.
Markets have been worried that the Fed has little room to
maneuver with inflation still a problem and the economy weak.
Economic worries came to the fore after the Conference
Board's report on consumer sentiment, as well as housing data
from Standard & Poor's/Case-Shiller, suggested a likely drop in
U.S. spending, which could keep a squeeze on economic growth.
U.S. home prices in April extended their record slump in
annual terms, although the pace of declines ebbed month over
month, though it did not provide much comfort for investors.
"Worries over a slowdown have spread from financial market
professionals to people in the real economy, and it confirms
what the market has been fearing for a while," said Jean-Claude
Petit, head of equities at Barclays Wealth Managers France.
Financial stocks are down about 12 percent so far in June,
according to the S&P financial index <.GSPF>. Many large U.S.
bank stocks are trading at decade lows.
The Dow Jones industrial average <> closed down 34.93
points, or 0.29 percent, at 11,807.43. The Standard & Poor's
500 Index <.SPX> fell 3.71 points, or 0.28 percent, at
1,314.29. The Nasdaq Composite Index <> slid 17.46 points,
or 0.73 percent, at 2,368.28.
The FTSEurofirst 300 <> index of top European shares
ended 0.7 percent lower, at 1,214.25 points, its lowest close
since mid-March. The index has lost about 9 percent so far in
June.
In the late recovery by banks in Europe Royal Bank of
Scotland <RBS.L> ended up 2.2 percent, Barclays <BARC.L> up 3.7
percent and BNP Paribas <BNPP.PA> up 2 percent.
The weakness in equities boosted bonds as investors pulled
assets from riskier investments and turned to the perceived
lower risk of government debt.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose
16/32 to yield 4.10 percent. The 30-year U.S. Treasury bond
<US30YT=RR> added 24/32 to yield 4.65 percent.
In European debt markets, stronger-than-expected French
data upset Bunds in early trading. But a lower open on Wall
Street, after a profit warning from package delivery company
United Parcel Service <UPS.N>, stirred worries about the U.S.
economy as did U.S. consumer confidence.
"The story has been the slide in equity markets and the
consequent rebound in interest rate markets. It's been a
continued day of pessimism that hasn't just hit the euro zone,"
said Investec economist David Page.
The euro hit a session high of $1.5621 <EUR=> after the
consumer confidence data also showed expectations of future
prosperity were at an all-time low.
The dollar slid against major currencies, with the U.S.
Dollar Index <.DXY> down 0.25 percent at 73.246. Against the
yen, the dollar <JPY=> fell 0.02 percent at 107.77.
The euro <EUR=> was up 0.31 percent at $1.5571.
Analysts said that complicates matters for the Fed as it
tries to prevent the U.S. economy from slipping into recession
while also grappling with rapidly rising inflation.
"No doubt, this complicates life for the Fed," said Boris
Schlossberg, senior currency strategist at DailyFX.com in New
York. "If the U.S. consumer is indeed crumbling, does the Fed
really have the power to raise interest rates at what looks
like the beginning of a nasty little recession?"
Gold ended higher, rebounding from the previous session's
sharp drop, as a softening dollar against the euro and the
firming of oil prices encouraged buyers.
Gold <XAU=> last traded at $888.70/889.70 an ounce in New
York.
Oil prices rose early on rumors of an attack on Iran's
nuclear sites amid rising tensions with Israel over Tehran's
nuclear program. Denials of an attack by both Iran and Israel
helped calm financial markets and pare oil's early gains.
U.S. crude <CLc1> settled up 26 cents at $137.00 a barrel
after trading as high as $138.75 earlier. London Brent crude
<LCOc1> gained 55 cents to settle at $136.46 a barrel.
Surging energy costs in Asia coincided with signs of a
global economic slowdown overnight in Asian markets, a bad omen
for a region that relies on exports to help fuel profits.
Tokyo's Nikkei average <> closed flat.
The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> inched down 0.1 percent, after at one point
hitting its lowest since late March.
(Reporting by Ellis Mnyandu, Steven C. Johnson and Chris
Reese; and Jane Merriman, Jan Harvey and Kirsten Donovan in
London and Blaise Robinson in Paris)
(Reporting by Herbert Lash. Editing by Richard Satran)
