Stocks, Bonds and Oil Climb as Dollar Falls

In a wild day on Wall Street, the dollar tumbled, oil jumped, and stocks and bonds rallied amid a barrage of markets- moving news Wednesday.

The euro closed above $1.30 for the first time and the dollar plunged below the key level of 105 yen after Treasury Secretary John W. Snow signaled that the Bush administration would not stand in the way of a further dollar decline.

In the oil market, prices initially sank after the government reported the eighth straight weekly rise in U.S. crude inventories. But concerns about short supplies of heating oil later sparked a rebound in prices, and near-term crude futures in New York ended 73 cents higher at $46.84 a barrel.

In the stock market, retail shares led a broad rally early in the session after Kmart Holding and Sears announced plans to combine. Prices pulled back later, however. The Dow Jones industrial average, which had been up 115 points at its peak, ended with a gain of 61.92 points, or 0.6%, at 10,549.57.

The Standard & Poor’s 500 index index rose 6.51 points, or 0.6%, to 1,181.94, and the Nasdaq composite surged 21.06 points, or 1%, to 2,099.68, its highest since January.

Trading was heavy, and winners topped losers by about 2 to 1 on the New York Stock Exchange and on Nasdaq.

Encouraging economic data helped stocks stay in the black even as oil rebounded, analysts said. The government said industrial production and housing starts jumped in October. A larger-than-expected rise in October consumer inflation also pointed to economic strength, experts said.

That same strong economic data might have been expected to hurt the bond market, driving yields up. Instead, bonds rallied, sending the yield on the 10-year Treasury note down to 4.13% from 4.21% on Tuesday.

Some bond traders said the market was reacting in part to the dollar’s steep slide, particularly against the yen. The latest drop could drive Japanese officials to attempt to help the dollar by selling yen and purchasing U.S. bonds with the proceeds, some analysts said.

Japanese Finance Minister Sadakazu Tanigaki told reporters in Tokyo that the government was paying “close attention” to exchange rates, but he declined to comment on the level of the yen. Japan hasn’t sold its currency to stem gains since March, according to finance ministry figures. But in the past, the 105-yen mark has been a sort of line in the sand for Japan.

On Wednesday, the dollar slid to a seven-month low of 104.06 yen in New York from 105.38 on Tuesday. The euro ended at a record $1.304, up from $1.296.

As recently as Aug. 2 the dollar was worth 110.72 yen, and the euro was worth $1.203.

Many economists believe that the U.S. dollar must fall further to narrow the nation’s massive trade gap with the rest of the world. A weaker dollar makes U.S. goods cheaper abroad, while raising prices of imports.

Some European governments have complained that the dollar’s slide is unfairly hurting their exporters. But when asked Wednesday in London whether he would support an agreement with Europeans to manage the pace of the dollar’s decline, Snow said, “The history of efforts to impose non-market valuations on currencies is at best unrewarding and checkered,” Bloomberg News reported.

Mitul Kotecha, head of currency strategy in London at investment bank Calyon, told Bloomberg: “The bottom line is that Snow has put no barrier to dollar weakness -- the green light is still there to sell the dollar.”

Finance ministers from the Group of 20 rich and emerging-market nations are expected to discuss the dollar at a summit this week in Berlin.

Among the day’s market highlights:

* The prospect of a weaker dollar helped push up shares of some major U.S. exporters, including Caterpillar, up $1 to $90.88, and Boeing, up 75 cents to $54.75.

* Some investors snapped up retail stocks in the wake of the Kmart/Sears deal. May Department Stores jumped $2.23 to $30.75 and J.C. Penney gained 70 cents to $40.68. But Wal-Mart slid 65 cents to $56.24.

* Gold stocks zoomed as near-term gold futures rose $4.60 to a 16-year high of $444.80 an ounce in New York. Gold got a boost from the weak dollar.

* Energy stocks rebounded with crude prices and as heating oil futures jumped 8.45 cents to $1.41 a gallon in New York. In its weekly report on oil inventories, the government said distillate supplies, which include heating oil, fell for a ninth straight week even though crude inventories rose.