Oil breaks $100, stocks rebound on U.S. data

NEW YORK (Reuters) - The Dow industrials rose on Thursday as mildly encouraging employment and factory data soothed nerves about U.S. economic health while a slide in U.S. crude inventories pushed oil above $100 for the first time.

Long-dated Treasury debt prices fell, reversing Wednesday's rally, and worries about high oil prices and a falling dollar sent long-dated Treasury prices lower and propelled gold to a new record as investors sought a hedge against inflation.

The U.S. data helped the dollar pare overnight losses against the euro and yen, but analysts said the outlook for the greenback was grim, particularly with markets betting on another Federal Reserve interest rate cut this month.

An expected cut by the Fed in the fed funds rate to 4 percent would bring it in line with euro-zone rates, erasing the dollar's yield advantage over the euro.

For now, though, some investors were breathing a sigh of relief after data showing U.S. private employers added 40,000 jobs last month, which helped stocks recover some of the sharp losses seen on the first trading day of 2008.

"It seemed as though people were expecting no job creation, so when they saw 40,000 jobs, we stabilized on the possibility things weren't as bad as expected," said Frank Lesh, futures analyst and broker at FuturePath Trading LLC in Chicago.

The data may bode well for Friday's non-farm payrolls report, which also includes public sector jobs and was expected to show a 70,000 job gain in December.

A larger-than-expected rise in November factory orders also boosted stock prices, though gains were limited by General Motors, which fell to a 19-month low after its chief executive said he sees 2008 auto sales near 2007 levels.

The Dow Jones industrial average was up 34.63 points, or 0.27 percent, at 13,078.59 while the Standard & Poor's 500 Index was up 2.96 points, or 0.20 percent, at 1,450.12. The Nasdaq Composite Index bucked the trend, falling 2.97 points, or 0.11 percent, at 2,606.66.

European shares were mixed on Thursday. The FTSEuroFirst 300 index fell 0.2 percent to 1,484.8. But Britain's FTSE 100 rose 1 percent, as rising oil prices lifted energy and mining shares, including BP and BHP Billiton.

U.S. crude for February delivery pushed as high as $100.05 per barrel -- the highest price recorded since the New York Mercantile Exchange launched futures trading in 1983 -- before easing to $98.18, 44 cents lower on the day.

Traders drove up prices after data showed a sharp slide in crude oil supplies in the United States, the world's biggest energy consumer.

Oil rose nearly 58 percent in 2007, the biggest annual gain this decade.

Record energy prices prompted investors to snap up gold as a safe-haven investment and inflation hedge. The gold contract for February delivery traded on the COMEX division of the New York Mercantile Exchange hit a record high of $872.90 an ounce before easing to $865.30, up 0.6 percent.

The dollar gained some traction in the wake of the U.S. economic data. Earlier, it had fallen to a five-week low versus the yen as investors unwound risky carry trades financed in the Japanese currency, though it pared those losses in New York to trade at 109.33 yen, down 0.2 percent. The euro was 0.1 percent firmer at $1.4742.

On Wednesday, the dollar had its worst day since May 2006, and investors remained wary of betting on the currency.

"With any fall in euro or yen, we would be buying those against the dollar because the outlook as far as we're concerned is going to continue to deteriorate," said David Mozina, head of foreign exchange strategy at Lehman Brothers in New York.

In the bond market, inflation concerns hit the benchmark 10-year Treasury note, which fell 4/32 to yield 3.92 percent, and the 30-year bond, which shed 17/32 for a yield of 4.38 percent.

But the two-year note edged up 3/32 to yield 2.83 percent on the view that the Fed will continue to cut benchmark interest rates.

(Additional reporting by Ian Chua, Atul Prakash and Anshuman Daga in London and Jennifer Coogan, Gene Ramos, Chris Reese and Nick Olivari in New York; Editing by Leslie Adler)