Wall Street finished higher in choppy trade on Wednesday after upbeat data on US new home sales and manufactured durable goods orders fueled hopes that an economic recovery is in sight.

Trade was volatile, however, amid tensions on the bond and currency markets, which prompted a dip into negative territory before a late recovery on the stock market.

The Dow Jones Industrial Average rose 89.84 points (1.17 percent) to close at 7749.81, after the blue-chip index squandered an early rally of some 200 points.

The tech-dominated Nasdaq composite was up 12.43 points (0.82 percent) to 1528.95 and the Standard & Poor's 500 index climbed 7.76 points (0.96 percent) to 813.88.

Home and dry

The market got off to a strong start after government figures showed an unexpected rise in new home sales and orders for US-made durable goods after months of declines.

"This adds to a growing list of economic indicators suggesting that the rate of decline in the economy may be slowing," said Frederic Dickson, chief market strategist at DA Davidson & Co.

The Commerce Department said orders for US-made durable manufactured goods rose 3.4 percent from January, confounding analysts who had expected a 2.4 percent decline.

The department also said that sales of new homes in the United States rose 4.7 percent in February after six months of consecutive declines.

"Sales remain incredibly weak but, as with the existing sales numbers (which saw a rise last week), we are prepared to hazard the view that the post-Lehman (Brothers) meltdown is now over and the market is stabilizing," said economist Ian Shepherdson at High Frequency Economics.

But the early rally ran out of steam as bond yields rose following what analysts called a less-than-successful auction of US Treasury bonds.

Bond market analyst John Jansen cited a "debacle in the Treasury market" that could push up mortgage rates and potential delay an economic recovery.

The currency markets were stunned by an apparent gaffe amid debate on China's suggestion that the dollar be replaced as the world's reserve currency.

Joel Kruger at Forex Capital Markets said the dollar saw "whipsaw price action resulting from comments from Treasury Secretary Geithner."

Dollar in a tailspin

Kruger said Geithner sent "the dollar into a tailspin after saying that he was 'quite open' to China’s suggestion of moving to an (IMF)-linked currency system."

"However, minutes later Geithner was quick to mitigate impact from the comments after reaffirming the dollar's place as the world’s reserve currency for a long time to come."

Currency analyst Kathy Lien said "these contradictory statements are clearly the act of an amateur Treasury secretary that is forced to eat his words."

Bonds were hammered amid the turmoil. The yield on the 10-year US Treasury bond rose to 2.772 percent from 2.654 percent on Tuesday and that on the 30-year bond increased to 3.717 percent from 3.606 percent. Bond yields and prices move in opposite direction.

Financial stocks remained in focus following a strong rebound over the past two weeks from depressed levels on the government's stabilization plan for the sector.

Bank of America rose 6.65 percent to 7.70 dollars after its Chief Executive Kenneth Lewis said in an interview he wanted to start repaying $45-billion in federal bailout funds next month.

Citigroup fell 1.99 percent to 2.95 dollars, JPMorgan Chase rallied 8.18 percent to 28.56 dollars and Wells Fargo added 5.94 percent to 16.42 dollars.

Pfizer, the world's largest drugmaker, rose 2.44 percent to 14.26 dollars after it raised $13.5-billion in the bond market, including to fund a portion of the cost of its buyout of sector rival Wyeth.

General Electric edged up 0.77 percent to 10.49 dollars as it won a $300-million contract to supply compression equipment for the second phase of a natural-gas pipeline across China.

AFP

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