U.S. bonds, S&P 500 and Nasdaq rise, euro falls

By Walter Brandimarte

NEW YORK (BestGrowthStock) – U.S. government bond prices recovered on Thursday from a sharp sell-off earlier in the week, supporting equity markets, but the euro fell (Read more about the trembling euro. ) after a rating agency’s downgrade of Ireland revived concerns about the euro-zone debt crisis.

Bargain-hunters bought Treasuries again after the 10-year note’s yield reached a six-month high of 3.33 percent on Wednesday. Strong demand in Thursday’s auction of 30-year bonds also helped dismiss fears that investors had lost confidence in U.S. government debt.

“A great, great auction to end the week and the recent outperformance in 30-years was a strong hint that buyers lurked,” said William O’Donnell, head of U.S. Treasury strategy at RBS Securities Inc in New York.

Other strategists anticipate Treasuries will rally into year-end. The benchmark 10-year note rose 16/32 in price, with the yield at 3.213 percent. The 30-year bond jumped almost 1 full point in price, taking its yield down to 4.40 percent.

The vote of confidence in U.S. government debt took some pressure off equity markets, but Asia still looked set for a tepid start, with Japan’s Nikkei futures traded in Chicago falling 30 points to 10,250.

“The stock market has been looking at the rise in yields,” said Burt White, managing director at LPL Financial in Boston. “It was a little bit of a sigh that the auction went a little better than anticipated and we’re not going to see a continued surge in bond yields because that, over time, would end up being a negative.”

Stocks got a lift from U.S. jobless claims, which fell more than expected in the latest week. But resistance from Democratic leaders to the extension of Bush-era tax cuts weighed on the market.

The plan to extend tax cuts for two years, agreed to by President Barack Obama and Republican leaders, will not be taken up for a vote in the U.S. House of Representatives in its current form, according to an aide for House Speaker Nancy Pelosi.

The S&P 500 and the Nasdaq ended higher, but the Dow finished practically flat after major manufacturer DuPont (DD.N: ) gave its outlook for 2011. DuPont’s shares slipped 1.1 percent to $48.32.

The Dow Jones industrial average (.DJI: ) dipped 2.42 points, or 0.02 percent, to end at 11,370.06.

But the Standard & Poor’s 500 Index (.SPX: ) rose 4.72 points, or 0.38 percent, to finish at 1,233.00, its highest close since September 2008. The S&P rose above 1,228, a key technical resistance level. The Nasdaq Composite Index (.IXIC: ) gained 7.51 points, or 0.29 percent, to 2,616.67, its highest close since December 31, 2007. This was the Nasdaq’s seventh consecutive day of gains.

In Europe, the FTSEurofirst 300 (.FTEU3: ) index closed higher for the fourth consecutive session. The pan-European index rose 0.38 percent to 1,123.75 points after earlier touching 1,127.67, its highest since September 2008.

“People are focusing on the growth prospects for next year,” said Richard Jeffrey, chief investment officer at Cazenove Capital Management.

MSCI’s All-Country World Index (.MIWD00000PUS: ) advanced 0.34 percent, while its emerging market index (.MSCIEF: ) edged up 0.12 percent.

EURO-ZONE WORRIES

The euro fell (Read more about the trembling euro. ) after Ireland’s center-left opposition Labour party said it will vote against an 85-billion-euro IMF/EU bailout package when it is put before parliament for approval next week.

“Word the Irish Labour Party will vote against the bailout sent us down here to test the lows. Some longs are dumping euros here,” said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey.

The European single currency was also hurt by Fitch’s decision to slash Ireland’s credit rating by three notches to BBB-plus.

The euro tumbled to session lows around $1.3169 and then recouped some of that loss to $1.3233, down 0.17 percent for the day.

The dollar was just slightly up against a basket of major currencies, with the U.S. Dollar Index (.DXY: ) gaining 0.1 percent.

U.S. crude oil rose 9 cents, or 0.1 percent, to settle at $88.37 a barrel, as the U.S. jobless claims data fueled some optimism about the recovery of the world’s largest economy.

Spot gold ended practically flat at $1,384.40 an ounce, in the choppiest session of the past two weeks.

(Reporting and writing by Walter Brandimarte; Additional reporting by Richard Leong, Leah Schnurr and Steven C. Johnson; Editing by Jan Paschal)

U.S. bonds, S&P 500 and Nasdaq rise, euro falls