Stocks turns lower in choppy trade, yen slumps after BOJ talks down rate hikes

By Sinéad Carew and Alun John

NEW YORK/LONDON - Wall Street equity indexes lost ground after opening higher on Wednesday while a bond auction pushed Treasury yields higher

and the dollar rose against the yen after cautious central banker comments.

Oil prices rallied after data showed a bigger-than-expected draw in U.S. crude stockpiles, even as worries about weak oil demand in China persisted.

Earlier Bank of Japan Deputy Governor Shinichi Uchida said the central bank will not raise interest rates when financial markets are unstable, pushing the yen down.

But in equities, the Nikkei rose 1%, adding to Tuesday's 10% rebound from Monday's sell-off. The Nikkei's 12.4% sell-off on Monday started a global stock as investors went into risk-off mode.

After opening higher on Wednesday Wall Street's benchmark S&P 500 started losing ground in the late morning and fell further following a weak auction of U.S. 10-year Treasuries.

While the S&P added 1% on Tuesday, Chad Oviatt, Director of Investment Management at Huntington Private Bank pointed out that it had ended the session well below its peak for the day.

"Today seems to be a continuation of the reactionary forces in the market and we seem to be lacking conviction in that 'buy the dip mentality'," said Oviatt. "It could be that investors are sitting on the sidelines due to market volatility ... you wait for stability before wading back in."

Wednesday's data, however, was upbeat as interest rates for the most popular U.S. home loan plunged last week to their lowest levels in 15 months, after the Federal Reserve said it could start cutting rates in September. And the Mortgage Bankers Association said refinancing applications hit a two-year high.

On Wall Street at 02:59 p.m. the Dow Jones Industrial Average fell 211.80 points, or 0.54%, to 38,785.86, the S&P 500 lost 26.89 points, or 0.51%, to 5,213.14 and the Nasdaq Composite lost 120.72 points, or 0.74%, to 16,246.14.

MSCI's gauge of stocks across the globe pared gains and last rose 0.88 points, or 0.11%, to 771.87 after earlier hitting a session high of 783.83. Europe's STOXX 600 index had closed up 1.5%.

In currencies, the yen dropped after the BoJ comments on hikes, which soothed investors' concerns about volatility in the Japanese currency, which had soared against the dollar on Monday on fears of a U.S. recession, causing a broader market rout.

Against the Japanese yen, the dollar strengthened 1.84% to 146.95. The euro was down 0.09% at $1.092.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, gained 0.23% at 103.22.

In U.S. Treasuries, yields were volatile after the Treasury Department's auction of $42 billion in 10-year notes.

The yield on benchmark U.S. 10-year notes rose 8.2 basis points to 3.97%, from 3.888% late on Tuesday.

The 2-year note yield, which typically moves in step with interest rate expectations, rose 2.5 basis points to 4.0096%, from 3.985%. The 30-year bond yield rose 8.4 basis points to 4.2614%.

Oil prices climbed on concerns that an escalating Middle East conflict could hurt oil production, even as worries about weak crude demand persisted. [O/R]

U.S. crude settled up 2.77% at $75.23 a barrel and Brent rose to $78.33 per barrel, up 2.42% on the day.

In precious metals, spot gold lost steam and was last down 0.16% at $2,385.63 an ounce. U.S. gold futures fell 0.04% to $2,388.20 an ounce.

This article was generated from an automated news agency feed without modifications to text.