NEW YORK U.S. stocks rose but safe-haven bids for Treasuries and gold jumped on Wednesday after a coordinated worldwide central bank interest rate cut led investors to snap up beaten-down shares following the worst five-day point loss ever for major American stock indexes.
The U.S. dollar extended losses against the yen, and gold held onto its gains as investors fled to safety after an initial euphoria in Europe over the rate cuts by the world's leading central banks fizzled.
The dollar traded down 0.87 percent at 100.45 yen, moving away from a session high of 101.70.
Spot gold prices rose $16.40 to $903 an ounce.
Oil prices also fell by almost $2 a barrel, but trimmed those losses as equity markets turned.
Reaction to the cuts -- by the U.S. Federal Reserve, European Central Bank, Bank of England and People's Bank of China, among others -- initially led equity investors to trim deep losses on many bourses in Europe.
After Wall Street opened lower, stocks soon began a sharp upward climb.
Shortly after 10 a.m. New York time, the Dow Jones industrial average .DJI was up 122.81 points, or 1.30 percent, at 9,569.92. The Standard & Poor's 500 Index .SPX was up 18.74 points, or 1.88 percent, at 1,014.97. The Nasdaq Composite Index .IXIC was up 38.36 points, or 2.19 percent, at 1,793.24.
U.S. Treasury debt prices pared gains not long after the open though as safe-haven bids fizzled on the back of a stronger stock market and financial services shares cut losses.
Benchmark 10-year U.S. Treasury notes were trading unchanged in price to yield 3.51 percent, while 2-year Treasury notes were trading 2/32 higher in price, to yield 1.44 percent from 1.47 percent late on Tuesday.
How much the rate cuts will allow troubled banks to improve their balance sheets and keep businesses humming was unclear.
The International Monetary Fund said the financial upheaval would exact a heavy economic toll as markets wrestle with a crisis of confidence and global credit is choked off. It said the world economy was set for a major downturn with the United States and Europe either in or on the brink of recession.
The IMF slashed its 2009 forecast for world growth to 3.0 percent from a July projection of 3.9 percent, and warned that a recovery from the worst financial crisis since the 1930s would be unusually slow.
"I do not think the cuts will solve the situation. It will help smooth the situation, but I don't think there are any miracle cures at the moment," said Simon Weeks, director of precious metals at Bank of Nova Scotia.
The rate cuts were just part of efforts by various authorities to inject calm and money into the battered financial system.
Losses on global stock markets have been huge this year, especially since mid-September when the collapse of U.S. investment bank Lehman Brothers sparked heavy selling.
Since global markets peaked about 12 months ago, more than $12.4 trillion in stock market wealth across the world has been wiped out, according to MSCI's main world equity index .MIWD00000PUS.
More than one-third of that loss -- about $4.6 trillion -- has occurred since Lehman's bankruptcy.
(Writing by Herbert Lash)