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GLOBAL MARKETS-U.S. stocks waver on stimulus concerns, oil falls

Published 02/09/2009, 05:23 PM
Updated 02/09/2009, 05:24 PM
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* Stocks waver as doubts rise about U.S. stimulus plan

* Oil falls as recession fears add to worries about demand

* Dollar weakens across the board as safety bid weakens (Adds close of U.S. markets)

By Herbert Lash

NEW YORK, Feb 9 (Reuters) - U.S. stocks wavered and oil prices slipped on Monday as concerns about weak demand and fears that Washington's plans to heal the U.S. economy might prove insufficient turned markets lower.

Downbeat broker comments on consumer companies and more dismal earnings reports led the Dow lower and offset hopes that U.S. President Barack Obama's plan to bail out the ailing U.S. financial sector will spare shareholders.

Oil also turned lower late in the day as a weak outlook for U.S. fuel demand outweighed expectations Congress will pass an $800 billion economic recovery package and talk of supply cuts by the Organization of Petroleum Exporting Countries.

"The recession argument is winning out time and time again," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

"In the case of the OPEC cuts, we're starting to see them, but they still have some ways to go," he said. "In terms of the effect of the stimulus package, that's not something that's going to be seen in the real economy until the late third quarter or fourth quarter (of 2009) at the soonest."

U.S. crude for March delivery settled at $39.56, down 61 cents. London Brent settled at $46.02, down 19 cents.

The dollar fell as expectations Congress will approve the stimulus plan this week helped ease risk aversion while the benchmark S&P 500 stock index to closed slightly higher.

"One of the things that has been driving the dollar was fear and lack of risk appetite," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey.

"So if the financial bailout package gives people confidence the financial system problems are behind us, they will be more disposed to take foreign currency risk and that will lead (investors) away from the dollar," Trevisani said.

The dollar fell against a basket of major currencies, with the U.S. Dollar Index <.DXY> down 0.58 percent at 84.794.

Gold futures ended below $900 an ounce and world stocks as measured by MSCI's all-country index rose slightly on hopes for a stimulus plan.

A newly energized Obama launched a new drive to win the stimulus plan's passage, flying to Elkhart, Indiana, to make his case to residents of a city where the unemployment rate has soared to 15.3 percent from 4.7 percent a year ago.

Obama also was due to hold his first White House news conference in the evening.

Focus on the stimulus package led the administration to postpone Treasury Secretary Timothy Geithner's much-awaited announcement of a bank rescue plan until Tuesday. However, analysts said it's unclear how much it will boost stocks.

"Everyone's waiting for Geithner tomorrow," said Steven Masocca, managing director at Wedbush Morgan in San Francisco. "Expectations are raised or as high as they can be -- it may be a bit anti-climatic because a lot of the details have already leaked out."

Shares of leading soft drink makers Coca-Cola and Pepsi Co fell after broker downgrades by Goldman Sachs and Citigroup on each company's respective price target.

Coca-Cola, a Dow component, dropped 2.9 percent, while PepsiCo slid 3.9 percent.

The Dow Jones industrial average closed down 9.72 points, or 0.12 percent, at 8,270.87. The Standard & Poor's 500 Index rose 1.29 points, or 0.15 percent, at 869.89. The Nasdaq Composite Index <.IXIC> fell 0.15 points, or 0.01 percent, at 1,591.56.

Earlier, European shares rose for the fourth session in five, wiping out almost all year-to-date losses in an index of top regional shares.

In Europe a rise in bank stocks was supported by better-than-expected results at Barclays, which rose 10.9 percent after posting a 6.1 billion pound ($9 billion) profit and saying credit market losses were waning.

U.S. banks also rose, with the the S&P financial index up 1.3 percent. But the ability of the sector as a whole to impact the market has been greatly diminished because flagging stock prices of financial companies have cut their market caps, reducing their weight on the overall market.

The benchmark 10-year U.S. Treasury note, which earlier had been lower, rose 1/32 in price yield 2.99 percent. The 2-year U.S. Treasury note fell 2/32 in price to yield 1.02 percent.

The euro rose 0.68 percent at $1.3019 and against the yen, the dollar fell 0.57 percent at 91.46.

Spot gold prices fell $16 to $894.55 an ounce. (Reporting by Ellis Mnyandu, Gertrude Chavez-Dreyfuss, Chris Reese and Rebekah Kebede in New York; and Brian Gorman, Naomi Tajitsu and Ian Chua in London; writing by Herbert Lash; Editing by Kenneth Barry)

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