Stocks seesaw, dollar up on recovery jitters

By Manuela Badawy

NEW YORK (BestGrowthStock) – Stocks zig-zagged while the dollar rose against the euro on Monday as investors worried about the sustainability of the economic recovery ahead of congressional testimony by Federal Reserve Chairman Ben Bernanke.

Concern about Greece’s indebtedness continued to weigh on the euro and supported the dollar.

The stronger dollar helped drive down copper and gold, which hit a one-month high earlier, and as risk appetite eased. Oil closed higher as a French refiner strike and tensions over Iran’s nuclear program outweighed the gains in the dollar.

Bernanke is scheduled to testify on the U.S. central bank’s discount rate hike and monetary policy in general before House of Representatives and Senate committees on Wednesday and Thursday, and investors hope he will clarify the Fed’s thinking behind last week’s hike in the discount rate.

“The market is still processing a lot of the news on the rate increase. It does seems like there’s a little concern,” said Dennis Cajigas, senior market strategist at Lind-Waldock, a retail brokerage firm in Chicago.

“People are still trying to figure out what the intentions of Bernanke are moving forward,” Cajigas said.

U.S. banks shares continued to rise as the Fed’s move was seen as a vote of confidence in the financial system. But overall, investors worried that the rate increase was the first move to withdraw an easy money policy that has helped boost Wall Street, keeping the market’s gains in check.

The Fed on Thursday raised the rate at which banks could borrow from its overnight window to 0.75 percent from 0.50 percent.

The Dow Jones industrial average .DJI closed down 19.04 points, or 0.18 percent, at 10,383.31. The Standard & Poor’s 500 Index .SPX fell 1.16 points, or 0.10 percent, at 1,108.01. The Nasdaq Composite Index .IXIC finished lower 1.84 points, or 0.08 percent, at 2,242.03.

European equities ended lower after advancing in the previous five sessions as weaker drug makers and food producers pressure the market, but analysts said overall momentum remained positive.

Crude oil prices CLc1 settled above $80 a barrel while copper prices HGc1 eased as China returned from a week-long Lunar New Year holiday in a downbeat mood.

U.S. crude had surged 7.7 percent last week, the largest single-week percentage gain since October. Monday’s rise in oil prices also reflected short-covering ahead of the expiration of the March U.S. contract. tensions over Iran’s nuclear program.

Gold XAU= fell as well as risk appetite eased and the dollar firmed. Strength in the U.S. currency tends to pressure dollar-denominated commodities.

“Markets are set to remain volatile in the week ahead due to the line-up of economic data and in particular Friday’s GDP reading as players look for sign of continued growth as the Fed begins to reign in its emergency measures,” said James Moore, analyst at TheBullionDesk.com

The U.S. Commerce Department will release its second estimate of fourth-quarter gross domestic product.

The FTSEurofirst 300 .FTEU3 index of top European shares closed 0.28 percent lower at 1,02315 points. The European index is down 2.0 percent in 2010, partly on worries that China’s moves to slow its economy and a potential Greek debt default may slow world economic growth.

GlaxoSmithKline shed 2.6 percent, after two U.S. drug safety reviewers recommended that its diabetes drug Avandia be pulled from the market.

MSCI’s world equity index .MIWD00000PUS rose 0.52 percent. Emerging market stocks .MSCIEF rose 1.07 percent, while Shanghai stocks .SSEC finished the first trading day lower after the Lunar New Year week-long break, as concerns persisted about further tightening in China’s monetary policy.

The U.S. dollar, against major currencies as measured by the ICE Futures Exchange’s dollar index (Read more about the global trade. ) .DXY, fell 0.13 percent at 80.643.

The euro EUR= fell 0.11 percent at $1.36 as lingering worries about Greece’s public finances capped its gains, while the dollar JPY= fell 0.51 percent against the yen at 91.12.

Reports that Germany’s Finance Ministry had prepared a bail-out plan for Greece under which countries using the euro would provide aid worth between 20 billion to 25 billion euros provided a brief boost to the euro earlier in the trading day.

U.S. Treasury bonds fell as demand for an $8 billion auction of 30-year TIPS inflation protected bonds was weak.

The U.S. Treasury Department last issued 30-year TIPS in October 2001. It will sell $44 billion of two-year notes on Tuesday, $42 billion of five-year notes on Wednesday and $32 billion of seven-year notes on Thursday.

The benchmark 10-year U.S. Treasury note US10YT=RR was down 5/32, with the yield at 3.7936 percent, up from 3.78 percent late on Friday. The 30-year U.S. Treasury bond US30YT=RR was down 12/32, with the yield at 4.7279 percent, compared with 4.71 percent late on Friday.

“Obviously, supply this week is going to be the big focus,” said Marty Mitchell, chief market technician at Stifel Nicolaus in Baltimore. “We’ll keep an eye on stocks as well coming out of the Federal Reserve’s discount rate move last week and the recent struggle for stocks to stay positive.”

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(Editing by Leslie Adler)

Stocks seesaw, dollar up on recovery jitters