u.s. stocks end up a bit, bonds dip, dollar drops GLOBAL...

u.s. stocks end up a bit, bonds dip, dollar drops GLOBAL MARKETS-U.S. stocks end up a bit, bonds dip, dollar drops
July 7, 2004 5:37pm ET (Reuters)

(Updates with U.S. market activity, previous LONDON)

By Dave Zimmerman

NEW YORK, July 7 (Reuters) - U.S. stocks rose a bit on Wednesday ahead of key earnings reports, but bonds slipped on a lackluster auction of government debt and the dollar fell on speculation future Fed interest-rate hikes will be restrained.

Gold surged back above $400 an ounce as the dollar fell.

And oil retreated on news that crude production would resume in Nigeria, an OPEC member, and that the entire cartel will boost output as planned in August.

Telecommunication companies Nextel Communications Inc. and Qualcomm Inc. were up, providing a slight boost to the technology-focused Nasdaq. Telecom equipment maker Motorola Inc helped lift the S&P 500 index .

Expectations of strong earnings helped push aluminum maker Alcoa Inc. higher, lifting the blue-chip Dow. Shares of Alcoa rose 79 cents, or 2.5 percent, to $32.77 on the New York Stock Exchange, before the release of its earnings after the closing bell on Wednesday.

Alcoa, the first Dow component to report second-quarter results, said its net income jumped, due to strong sales of alumina and chemicals drove profits higher.

After hours, Alcoa's stock fell to $31.65.

But Internet services provider Yahoo Inc. , which also was scheduled to report after the close, fell 62 cents, or 2 percent, to $32.60. The stock fell to $29.86 in after-hours trading, in spite of a quarterly profit that more than doubled on rising ad revenue. Yahoo's revenue grew, but it was less than some analysts' expectations.

The Dow Jones industrial average closed up 20.95 points, or 0.21 percent, at 10,240.29. The Standard & Poor's 500 Index finished up 2.12 points, or 0.19 percent, at 1,118.33, based on the latest figures. The technology-laced Nasdaq Composite Index ended up 2.65 points, or 0.13 percent, at 1,966.08.

Overseas, the FTSE Eurotop 300 index trimmed 0.14 percent to end at 981.68, and Japan's Nikkei fell 90.41 points or 0.79 percent to 11,384.86, its lowest close since June 18. The Nikkei's drop on Wednesday added to a 420-point decline in the previous three trading sessions.

BONDS EDGE DOWN

U.S. Treasury prices dipped as demand for an auction of $15 billion in new five-year notes fell short of loftier expectations.

"It was just a real average auction," said Gerald Lucas, chief Treasury and agency strategist at Banc of America Securities. "It sort of infers that the market isn't as short as people think."

The current five-year note lost its modest early gains, with the yield inching up to 3.64 percent. In when-issued trading, yields on the new five-year paper eased to around 3.6475 percent before the sale.

The benchmark 10-year Treasury note edged down 2/32 to a price fo 102-3/32, while its yield was flat at 4.48 percent.

The 30-year bond fell 2/32 to 102-4/32, its yield up a tick at 5.23 percent.

Yields on the two-year note were barely changed for a second session at 2.55 percent, after falling more than 20 basis points in just over a week. The two-year note's price was steady at 100-13/32 late Wednesday afternoon.

DOLLAR FALLS

The dollar tumbled to a three-month low against the euro as speculation grew that the Federal Reserve could take its time issuing dollar-boosting interest-rate hikes.

The dollar sell-off was an extension of one sparked by Friday's weaker-than-expected U.S. payrolls data and by a U.S. service-sector report showing a slowed pace of expansion. Data such as these bolster the case the the Fed can take the slow road to further tightening of monetary policy.

By late afternoon in New York, the euro rose 0.69 percent to $1.2370, just below session highs of $1.2389 , its highest level since early April.

The dollar fell against the safe-haven Swiss franc to its lowest level since mid-February, sliding to 1.2256 francs before climbing back slightly to 1.2270 francs.

The Australian dollar hit a two-month high above 72 U.S. cents, rallying even as Australia's central bank left its key interest rate unchanged at 5.25 percent.

Sterling also rose above $1.8500 even though the Bank of England Monetary Policy Committee is widely expected to leave interest rates on hold at the end of its two-day meeting on Thursday.

The dollar fell briefly to 108.20 against the yen as the outlook for the U.S. economy outweighed questions about Sunday's elections in Japan. The greenback was last down 0.84 percent at 108.50 yen.

GOLD SHINES, OIL DROPS

COMEX gold rose almost 2.5 percent on the back of a tumbling dollar and speculation that further rate tightening by the Fed would be restrained.

August gold settled up $9.70 at $402.70 an ounce, reversing a $5.70 loss on Tuesday. For the day, it traded from $392.40 to $404.00, its highest since June 28.

Spot gold rose to $402.00/2.75 by late New York trade from $392.30/2.80 at the previous close. Wednesday's afternoon fix in London was $399.65.

NYMEX crude oil futures ended sharply lower, following big gains on Tuesday, on news that the French oil company Total and a protesting workers union in Nigeria have agreed to resume production immediately after a five-day halt.

The news drove crude prices down, especially when combined with earlier remarks from Saudi Arabias oil minister that the Organization of Petroleum Exporting Countries will go ahead with a production boost planned for August and the resumption of Iraq oil exports after weekend pipeline sabotage.

NYMEX August crude fell 57 cents, or 1.4 percent, to settle at $39.08 a barrel. The days late trading low was at $38.75, holding support at that level. The days peak was reached at $39.55, far below resistance charted at $41.00. (Reporting by Elizabeth Lazarowitz, Pedro Nicolaci da Costa, Kyle Peterson, Gene Ramos and Alden Bentley)