(Updates with U.S. markets, changes dateline; previous
LONDON)
By Herbert Lash
NEW YORK, Dec 17 (Reuters) - U.S. stocks fell on Monday as
rising inflation and weak holiday shopping over the weekend
weighed on the outlook for economic growth and profits, while
bonds rose as investors sought the safety of U.S. Treasuries.
A New York state manufacturing index fell to a seven-month
low and diversified manufacturer Illinois Tool Works <ITW.N>
cut its fourth-quarter earnings estimate, adding to worries of
a U.S. economic slowdown.
The dollar rose against the euro amid speculation the
Federal Reserve would be less aggressive cutting interest rates
after last week's U.S. inflation data, and oil prices fell. A
firmer dollar and comments from Algeria's oil minister that
OPEC could raise output at a meeting in February cut prices.
America's Research Group, a consumer marketing firm,
lowered its holiday sales growth forecast to 1.8 percent from 2
percent after disappointing sales at malls and shopping centers
over the weekend.
In a sign that rising food and agricultural commodity
prices may fuel inflation globally, U.S. wheat futures surged
more than 3 percent and surpassed $10 a bushel for the first
time.
"There's a lot of negative potential out there," said Frank
Lesh, futures analyst and broker at FuturePath Trading LLC in
Chicago. "You have to look at all this stuff and figure how bad
is it going to be, in terms of GDP and earnings."
Benchmark U.S. stock indexes were down. The Dow Jones
industrial average <.DJI> was down 86.08 points, or 0.65
percent, at 13,253.77. The Standard & Poor's 500 Index <.SPX>
was down 9.89 points, or 0.67 percent, at 1,458.06. The Nasdaq
Composite Index <.IXIC> was down 32.44 points, or 1.23 percent,
at 2,603.30.
In Europe, shares extended losses, with the pan-European
FTSEurofirst 300 index <.FTEU3> down 1.6 percent at 1,492.7.
In Asia, Japanese and Hong Kong stocks fell for the fourth
straight session.
A sharp pullback in New York manufacturing and weaker stock
futures enhanced the allure of government bonds, while the
Fed's looming funding auctions served as reminder of a
pervasive crisis in credit markets.
Investors, expecting a drawn-out process, jumped back into
Treasuries despite data last week showing a surprise rise in
inflation.
"The markets are extremely nervous and so is the Fed," said
Gary Pollack, head of fixed-income trading at Deutsche Bank
Private Banking in New York.
A stronger dollar was also supported by an unexpected
surge, to $114 billion, in U.S. long-term capital inflows in
October, sharply higher than September's inflows of $15.4
billion.
The dollar was flat against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
off 0.06 percent at 77.505 from a previous session close of
77.550.
Crude oil prices slipped after Algerian Oil Minister Chakib
Khelil said OPEC might increase oil output at a February meeting if the market needed more oil.
In energy and commodities trading, U.S. light sweet crude
oil <CLc1> fell $1.71, or 1.87 percent, to $89.56 per barrel.
Spot gold prices <XAU=> fell $1.30, or 0.16 percent, to
$793.20.
(Reporting by Jennifer Coogan, Pedro Nicolaci da Costa, Lucia
Mutikani in New York and Jane Merriman in London; Editing by
Dan Grebler)
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Keywords: MARKETS GLOBAL