U.S. stocks rebound on bargain buying, oil slides

By Herbert Lash

NEW YORK (Reuters) - U.S. stocks rebounded sharply on Friday, shrugging off news of a grim U.S. jobs report that pushed the price of crude oil below $41 a barrel, as investors snapped up shares in a market they view as oversold.

The U.S. dollar rallied against the yen as stocks jumped despite Labor Department data showing 533,000 jobs were cut in November, the steepest monthly U.S. job losses in 34 years.

Oil dropped more than 6 percent to a four-year low on concerns a deepening recession will curb energy demand around the world, and metals prices -- including copper, aluminum, zinc and lead -- slipped to multiyear lows.

But U.S. stocks reversed losses to close 3 percent or more higher on hopes lower energy prices will give beleaguered consumers more spending powder.

The bleak U.S. jobs data earlier had dragged European stocks down by 4 percent.

U.S. stock markets, however, clawed back from losses of more than 3 percent in afternoon, with all components but two of the 30-stock Dow closing higher, up, led by discount retailer Wal-Mart Stores (WMT.N). General Motors Corp (GM.N) and AT&T (T.N) were the sole declining Dow stocks.

"It's all about price action. The market had this horrible news this morning, it didn't collapse," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.

The fall in crude prices, which had soared to a record over $147 a barrel in July, also helped lift Wall Street.

Lower oil "means more discretionary spending for consumers, who are starting to feel better about themselves because they don't have to drop $100 every time they want to fill up their tank," said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.

The Dow Jones industrial average .DJI closed up 259.18 points, or 3.09 percent, at 8,635.42. The Standard & Poor's 500 Index .SPX rose 30.85 points, or 3.65 percent, at 876.07. The Nasdaq Composite Index .IXIC gained 63.75 points, or 4.41 percent, at 1,509.31.

Stocks earlier had sold off broadly as investors feared the massive job losses would cause consumers to cut back spending and cut into corporate earnings.

European stocks slid on fears the U.S. jobs pointed to a deeper recession that expected, with oil companies and banking stocks leading the decline.

The pan-European FTSEurofirst 300 .FTEU3 index closed down 4 percent at 793.94 points; it has lost about half its value so far this year.

"When you see such a shocking employment number, you realize the devastating effect that can have on household demand," said Henk Potts, equity strategist at Barclays Stockbrokers in London.

The steep job losses led the price of euro zone government bond futures higher, pushing the 10-year cash yield below 3 percent and near Thursday's trough of 2.939 percent, the lowest in over 30 years.