Dollar Reversal News

A triple-digit gain for the blue chips evaporated on Thursday as enthusiasm for upbeat economic and corporate news was dwarfed by a late surge for the red-hot U.S. dollar, which benefited from new uncertainty over a possible rescue for Greece.

Today’s Markets

The Dow Jones Industrial Average rose 5.06 points, or 0.05%, to 10841.21, the Standard & Poor’s 500 lost 1.99 points, or 0.17%, to 1165.73 and the Nasdaq Composite sank 1.35 points, or 0.06%, to 2397.41. The FOX 50 added 1.81 points, or 0.21%, to 848.04.

After initially retreating on hopes for a resolution to the Greece debt crisis, the greenback rallied to fresh 10-month highs against the euro, putting pressure on commodities and multinationals. Equities tend to move in the opposite direction of the dollar. The late-day retreat on Wall Street also came in the wake of a second-straight poor Treasury auction, which pushed interest rates to their highest level in nearly a year.

“We had a little bit of a rally in the dollar and that kind of killed it,” NYSE trader Doreen Mogavero told FOX Business. Still, she said, “you cannot argue with this rally. I’ve been one of the naysayers, but you can’t deny the trend.”

The blue chips rallied more than 100 points and touched new 17-month intraday highs earlier in the day as the bulls cheered a better-than-expected weekly jobs report, Best Buy’s (BBY: 43.13, 0.46, 1.08%) bullish outlook and a Citigroup (C: 4.31, 0.03, 0.7%)-inspired rally in the financial sector. Those gains had left the Dow within striking distance of the 11000 threshold for the first time since Sept. 2008.

“You can’t argue with the fact we’re overbought. I think people got complacent that there weren’t going to be any real pullbacks,” said Michael James, senior equities trader at Wedbush Morgan Securities.

Even with the late-day fizzle, most of the Dow’s members closed higher, led by Microsoft (MSFT: 29.66, -0.34, -1.13%), Bank of America (BAC: 17.89, 0.15, 0.85%) and Walt Disney (DIS: 35.33, 0.22, 0.63%). The index’s worst performers were DuPont (DD: 37.69, -0.15, -0.4%) and Alcoa (AA: 14.27, 0.15, 1.06%).

Thursday’s choppy trading came a day after the blue chips fell 52 points, a modest slide that still marked their worst day in a month.

Wall Street’s rally collapsed Thursday afternoon as the U.S. dollar turned positive amid details of a Greece rescue that would involve the International Monetary Fund, not just the European Union. The euro renewed its decent after European Central Bank President Jean Claude Trichet told a French television station that if the rescue came from the IMF in lieu of the Eurogroup, “it is evidently, very, very bad.”

The Trichet comments overshadowed the ECB’s announcement that it will extend looser funding rules, removing the threat of having Greece’s bonds rejected as collateral. Greece, which is mired in the most serious debt crisis since the inception of the euro, has rattled global markets at times this year.

Hurt by the stronger dollar, resource stocks led the way lower on Wall Street and commodities fizzled. The basic materials sector sank 2% and stocks like Newmont Mining (NEM: 49.39, 1.03, 2.13%) lost even more ground. Crude closed at a ten-day low of $80.53 a barrel, down 8 cents, or 0.10%. Gold gained $4.10 a troy ounce, or 0.38%, to $1092.70.

Market sentiment was also hurt by another lackluster bond auction. The Treasury Department sold $32 billion of seven-year notes at a higher bid-to-cover ratio, capping off a week of subpar auctions. The yield on the ten-year note jumped to its highest level since June 2009 in the wake of the auction, renewing worries about higher interest rates curbing the global recovery.

Financial stocks had been in the lead earlier in the day, jumping as much as 2%. The group was driven higher by Citigroup (C: 4.31, 0.03, 0.7%), which rallied around a Bloomberg News report that the Treasury Department could unveil a plan to sell its 27% stake in the bank next month.

The earlier triple-digit rally had also been sparked by the Labor Department’s weekly unemployment figures, which showed initial claims dropped by a better-than-expected 14,000 last week to 442,000. Continuing claims, which are filed by those on benefits for more than week, declined by 54,000 to 4.65 million — the lowest level since Dec. 2008.

Corporate Movers

Best Buy (BBY: 43.13, 0.46, 1.08%) posted a stronger-than-expected profit of $1.82 a share and a bullish full-year EPS outlook of $3.45 to $3.60. Analysts had been expecting full-year EPS of just $3.37.

ConAgra (CAG: 24.64, -0.3, -1.2%) matched estimates with a non-GAAP profit of 44 cents a share. However, the food maker’s revenue fell 1% to a worse-than-expected $3.10 billion and it backed its 2010 non-GAAP earnings outlook that would miss estimates.

EBay (EBAY: 27.45, -0.12, -0.44%) saw its shares hit 52-week highs after Credit Suisse upgraded the online auction site to “outperform” from “neutral.” The analysts also upped their price target on eBay amid a new valuation of the company’s PayPal money transfer service.

Genzyme’s (GENZ: 53, 1.87, 3.66%) stock continued to dive as JPMorgan Chase reportedly downgraded it to “underweight.” The downgrade came a day after Genzyme warned the Food and Drug Administration will probably mandate it to install outside inspectors to monitor one of its plants due to non-compliance issues.

Red Hat (RHT: 28.39, -0.53, -1.83%) slumped nearly 6% a day after the software maker issued a weak fiscal 2011 profit outlook that overshadowed better-than-expected fourth-quarter results. Red Hat sees a non-GAAP profit of 71 cents to 74 cents, which would miss the Street’s view of 76 cents.

Global Markets

The U.K.’s FTSE 100 rose 0.88% to 5727.65, France’s CAC 40 advanced 1.28% to 4000.48 and Germany’s DAX jumped 1.56% to 6132.95.

In Asia, Tokyo’s Nikkei 225 gained 0.13% to 10828.85, Hong Kong’s Hang Seng fell 1.1% to 20778.55 and China’s Shanghai Composite slumped 1.23% to 3019.18.