(Updates U.S. markets with closing figures)
By Leslie Adler
NEW YORK, Feb 8 (Reuters) - The broader U.S. stock market
fell on Friday as renewed worries about the credit market
sparked a wave of selling in financial shares, but a rally in
beaten-down technology shares led the Nasdaq higher.
The credit market fears drove safe-haven buying of U.S.
government bonds, while the Dow Jones industrial average ended
its worst week in nearly five years.
Concerns about the precarious state of the U.S. economy,
highlighted by remarks late on Thursday by a Federal Reserve
official who said she was "not confident" a recession could be
avoided this year, added to the rally in U.S. Treasury debt
prices, which recovered from their worst rout in four years.
U.S. oil prices rose more than 4 percent, lifted by supply
concerns raised by Exxon Mobil Corp's <XOM.N> dispute with
Venezuela, as well as a forecast for colder weather in the U.S.
Northeast and output uncertainty in Nigeria.
"There is that fear angle still out there," said David
Coard, head of fixed-income sales and trading at the Williams
Capital Group in New York. "Add to that the fear of recession
and that is what is helping to give Treasuries a better bid
here."
In another sign of nervousness in the market, European
credit spread indexes widened to record intraday levels amid
rumors that a French bank or a fund was liquidating
collateralized debt obligations.
Financial shares in Europe also fell on the credit worries,
but gains in technology and mining shares drove European
markets to close higher.
The Dow Jones industrial average <> ended down 64.87
points, or 0.53 percent, at 12,182.13. The Standard & Poor's
500 Index <.SPX> lost 5.62 points, or 0.42 percent, at
1,331.29. The Nasdaq Composite Index <> was up 11.82
points, or 0.52 percent, at 2,304.85.
FINANCIALS DOWN, TECH UP
Last week's strong rally further unraveled and risk
aversion grew on suspicions that banks have more to do to clean
up their balance sheets.
American Express Co <AXP.N> shares led declines on the Dow,
while Bank of America Corp <BAC.N> was one of the top drags on
the S&P 500. The S&P Financials <.GSPF> were the worst
performer of the 10 major industry groups, losing 2.5 percent.
S&P financial index closed down 2.3 percent, with all but
nine of its 92 components posting declines.
Transportation stocks felt the pinch of rising energy
costs, with the Dow Jones transportation average down 0.95
percent.
Technology stocks, however, posted gains. Shares of
Microsoft Corp <MSFT.O>, a Dow component, gained 1.56 percent,
and shares of iPod maker Apple Inc <AAPL.O> rose 3.5 percent.
"Tech was very oversold and at its lowest extreme, so we
expected it to bounce," said Cleveland Rueckert, market analyst
at Birinyi Associates Inc in Stamford, Connecticut. "The Nasdaq
is (more than) 10 percent below its 50-day moving average, so
it's not surprising to see a bounce."
In Europe, gains in technology and mining shares propelled
the FTSEurofirst 300 index <> to close 0.5 percent
higher at 1,302.36 points, although it lost 3.7 percent on the
week. The MSCI main world equity index <.MIWD00000PUS> was down
0.12 percent.
Shares of top cell phone maker Nokia <NOK1V.HE> rose 3.1
percent and Ericcson <ERICb.ST> gained 3.3 percent, but French
bank Credit Agricole <CAGR.PA> lost 4.1 percent and BNP Paribas
<BNPP.PA> shed 2 percent.
Investor sentiment remained fragile, putting the focus
firmly on a weekend meeting of Group of Seven finance chiefs in
Tokyo, which will discuss policy responses to the deteriorating
economic climate.
ECB TO JOIN EASING CAMPAIGN?
In currency markets, the dollar slipped on light
profit-taking but remained on track for the biggest weekly rise
since June 2006 as investors increasingly expect the U.S.
growth slowdown to drag on other economies.
"It became clear this week that the economic slowdown has
been moving East and that Europe is not insulated," said Mark
Meadows at Tempus Consulting in Washington D.C. "The euro
suddenly came under pressure and it may continue so for a
while."
The euro edged up 0.2 percent at $1.4504 <EUR=> but was
still down almost 2 percent since Monday. Against the yen, the
dollar was down 0.1 percent at 107.40 yen <JPY=> .
Among G7 nations, central banks in the United States,
Britain and Canada have cut interest rates to boost their
economies, while the Bank of Japan and the ECB have held
steady.
The March Bund future <FGBLH8> was down 11 ticks.
On the New York Mercantile Exchange, March U.S. light crude
oil <CLc1> settled up 4.15 percent at $91.77 a barrel.
The jump in oil prices helped fuel a rise in gold <XAU=>,
which gained more than 1 percent.
(Additional reporting by Jennifer Coogan, Kevin Plumberg, John
Parry, Natsuko Waki, Rebekah Curtis, editing by Dan Grebler)
