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Wall St ends steady on oil’s drop; dollar rises

Wall St ends steady on oil’s drop; dollar rises

New York: Oil prices snapped a week-long rally on Monday, helping Wall Street recover from a shaky start to end flat, while positive US home sales data soothed investors worried about economic damage from high energy costs.

The dollar rose as some of the investment money in oil flowed into currencies after officials from the Group of 20 countries sounded fears that rising energy prices were hurting global economic growth.

The greenback rebounded from a near three-month low against the euro. It hit a nine-month peak versus the yen before giving back some gains.

US Treasuries climbed on demand for safe-haven government debt. The benchmark 10-year US Treasury note was up 14/32, its yield at 1.9273%.

High energy costs have been cited as one factor preventing a runaway rally in equities.

Stocks on Wall Street are up 9% year-to-date, as measured by the S&P 500 index, which on Monday closed at its highest since June 2008. But it has been stuck in a tight range of around 1,355-1,370 points despite data pointing to a firmer recovery in the US economy, including the housing and labor markets.

“A lot of positives are unfolding in the US, but a lot of that has been priced into this rally we’ve had since the fall. With the earnings season over, we may see a little bit of pullback," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, which has about $13 billion in assets.

“Now, when people talk about energy, they are talking about the geopolitical. But that morphs into a concern about demand, and the demand conversation kind of undermines confidence," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

Crude oil prices closed down for the first time in a week, losing a modest 1% from last week’s 10-month highs above $125 a barrel in London and 9-month peaks near $110 in New York.

The drop was in response to Saudi Arabia’s raising of crude exports over the past week and growing speculation that the Obama administration might tap US strategic oil reserves if prices continued rising.

Despite the correction, London’s Brent oil remained up 15% on the year while US crude showed a 9% gain year-to-date as Iran’s nuclear crisis and other Middle East-related supply concerns kept prices on a boil.

Stocks recovered from early lows after data showed contracts for US home resales rose to a near two-year high in January, lending more credence to the argument that the industry may be in the beginning stages of a recovery.

At the close, the Dow Jones industrial average was down 1.44 points, or 0.01%, at 12,981.51. The Standard & Poor’s 500 Index was up 1.85 points, or 0.14%, at 1,367.59. The Nasdaq Composite Index was up 2.41 points, or 0.08%, at 2,966.16.

In European equity markets, fear about rising energy costs hit the outlook for the automobile sector. The FTSEurofirst 300 index of top European shares closed down 0.3% at 1,073.81, below last week’s seven-month high.

Global equities suffered from a weaker session in Asia and Europe. The MSCI world equity index slipped 0.2% to 331.08. Year-to-date, it was still up over 10%.

The US dollar hit a 9-month high above ¥81.60 before retreating to 80.57. For the month, the greenback was still up nearly 6% as high oil prices and Japan’s 2011 trade deficit weakened the yen.

The euro was down 0.4% at $1.33999 versus Friday’s 2-1/2 month high of $1.3486.

Some market players saw the single currency mounting a comeback before the European Central Bank’s second long-term refinancing operation on Wednesday.

Others say the impact of the ECB’s operation may already be largely reflected in the prices of assets like European sovereign bonds and even the euro itself.

“It’s all pretty well priced in and pretty well expected. We’re looking for just under 500 billion euros and about 300 billion euros of net new liquidity," said Kevin Lecocq, chief investment officer for Private Wealth Management at Deutsche Bank. “Wednesday won’t be big."

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