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While you were sleeping: Caution rules, again

While you were sleeping: Caution rules, again

December 10 (BusinessDesk) - A U.S. labour report underpinned the cautious optimism about the American economic recovery, yet fell short of convincing investors to load up on equities.

Wall Street’s three benchmark stock indexes were mixed, with the Dow Jones Industrial Average down 0.21% while the S&P 500 Index and the Nasdaq Composite Index were up 0.15% and 0.14% respectively in midday trading.

First-time claims for jobless benefits fell more than expected last week and the four-week moving average dropped to a two-year low, a positive sign after last week's disappointing payrolls report.

"It gives us more confidence that the sloppy nonfarm payroll report was an aberration. So that number is going to be revised away, and we'll be looking at a much stronger jobs picture with the December report," Phil Orlando, chief equity market strategist at Federated Investors in New York, told Reuters.

Corporate earnings forecasts provided a mixed picture, too.

DuPont Co dragged the Dow lower because the bottom end of its 2011 earnings forecast fell short of analyst estimates.

But Goodyear Tire & Rubber Co jumped more than 8% after Bank of America Corp raised its rating for the stock.

The Dollar Index, which tracks the currencies of six U.S. trading partners, strengthened to 80.34, rising for a fourth day.

The greenback rose against the euro after Ireland's Labor Party said it would vote against the 85 billion euro bailout when it comes before parliament next week, and a ratings agency cut the country’s sovereign debt rating.

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The euro was last trading at US$1.3185, down about 0.5% on the day.

"Word the Irish Labour Party will vote against the bailout sent us down here to test the lows. Some longs are dumping euros here," Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey, told Reuters. "It's a question of people worrying about sovereign default risk, which is bad for the euro.

Meanwhile European carmakers took a hit after Xiong Chuanlin, vice secretary-general of the China Automobile Industry Association, said Chinese incentives for buying cars would likely expire at the end of the month as planned.

Shares of Volkswagen AG, PSA Peugeot Citroen and Continental AG dropped.

U.S. Treasuries gave up some of their earlier gains as the Federal Reserve bought less seven-year debt than anticipated.

The yield on the 10-year note was down 2 basis points at 3.26%, after having soared 35 basis points in the past two days.

The Treasury market selloff started after Fed Chairman Ben Bernanke announced a second round of government bond-buying and accelerated in recent days on concern the U.S. budget deficit was out of control.

Long-term government bond funds have lost 9.4% from mid-September through December 7, Reuters reported, citing Morningstar. And the price of the iShares Barclays 20+ Year Treasury Bond ETF is down 11.4%.

Through late November, investors have poured a net US$268.4 billion into fixed income mutual funds this year while pulling a net US$30.9 billion from stock funds, Reuters said, quoting data compiled by the Investment Company Institute.

(BusinessDesk)

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