August 22, 2012 / 12:42 AM / 5 years ago

S&P recovers from losses, dollar falls after Fed

A trader monitors the screen on a trading floor in London January 22, 2010. REUTERS/Stefan Wermuth

NEW YORK (Reuters) - U.S. stocks recovered from losses to finish flat on Wednesday, Treasury yields fell and the dollar tumbled broadly after Federal Reserve minutes suggested the central bank might ease monetary policy further soon.

The S&P 500 index fell early in the session on weak Japanese exports data and uncertainty surrounding Greece, whose leaders meet with European officials this week aimed at securing more time to push through reforms.

The Fed minutes from August said the U.S. central bank is likely to deliver another round of monetary stimulus “fairly soon” unless the economy improves considerably.

“This is quite a surprise, this announcement, and you are seeing the market react a bit favorably towards it,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

The Dow Jones industrial average .DJI ended down 30.82 points, or 0.23 percent, at 13,172.76. The S&P 500 Index .SPX finished up 0.32 point, or 0.02 percent, at 1,413.49. The Nasdaq Composite Index .IXIC closed up 6.41 points, or 0.21 percent, at 3,073.67.

The MSCI global share index .MIWD00000PUS fell 0.3 percent to 325.65, off a session trough of 324.03. The index hit its highest level since early May on Tuesday.

The Fed meeting took place before several recent encouraging U.S. economic reports. The movements by stocks and the dollar suggest “the market is questioning if the improvement we’re seeing is ‘substantial’ enough for Chairman (Ben) Bernanke,” Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey, said.

“I think he wants the (recently improving) economic data to translate into private sector job creation,” Krosby said. “Overall, in general, you can see the dollar weakened, telling you the initial reaction from the markets is that it is sooner rather than later that the Fed will come in.”

European shares fell from a recent 13-month high, with the FTSEurofirst 300 index of European shares .FTEU3 ending 1.2 percent lower.

Earlier, Japan said exports slumped the most in six months in July as shipments to Europe and China tumbled, adding to concerns over global demand.

U.S. Treasuries rallied after the Fed minutes, driving yields to their lowest levels in over a week. U.S. benchmark 10-year Treasury note yields fell 3 basis points to 1.71 percent, the lowest level since August 14.

Chances the Fed will launch a third round of money printing have risen slightly over the past month to 60 percent, according to a recent Reuters poll that also showed economists lowering economic growth expectations for this year and next.

Investors will now be closely scouring Fed Chairman Ben Bernanke’s speech at the central bank’s annual conference in Jackson Hole, Wyoming, at the end of this month for signs of whether the bank will act in September.

WEAKER DOLLAR

The dollar fell 0.9 percent to 78.53 yen, while the euro climbed 0.4 percent to $1.2516 after hitting a seven-week high of $1.2538 on Reuters data.

The dollar index .DXY, which tracks the greenback versus a basket of currencies, slipped 0.4 percent.

Greek Prime Minister Antonis Samaras conferred with Eurogroup chief Jean-Claude Juncker on Wednesday and asked that Greece be given more time to accomplish austerity goals.

Juncker appeared to keep the door open to an extension, saying a decision to grant more time would depend on a review by the European Union and International Monetary Fund of Greece’s progress.

Samaras will also meet with German Chancellor Angela Merkel and French President Francois Hollande later this week. But Merkel said there will be no decisions at Friday’s meeting with Greece.

Oil prices rose, bolstered by Fed easing hopes, a sharp drop in oil inventories and tropical weather threats. Brent crude advanced 27 cents to settle at $114.91. U.S. crude rose 42 cents to end at $97.26 per barrel.

Platinum rose to a 3-1/2 month high after signs of spreading unrest in top producer South Africa ignited concern among investors over supply. Spot gold surged above $1,650 an ounce for the first time since early May.

Additional reporting by Rodrigo Campos, Chuck Mikolajczak, žKaren Brettell and Nick Olivari; Editing by Kenneth Barry

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