NEW YORK Global stocks rose for a third day and the euro hit a one-month high on Wednesday, helped by brighter prospects for resolving Spain's debt woes, while better-than-expected housing data and gains among financials lifted most U.S. equities.
U.S. and German government debt prices fell after Spain avoided a damaging ratings downgrade from Moody's and stronger-than-expected U.S. housing data pointed to an improving economy, reducing safe-haven demand.
Growing speculation that Spain will ask for a bailout next month lifted the euro. A possible line of credit to Spain and some easing of German opposition to aid for Greece and Spain were also likely to support the euro in the near term.
Wall Street ended higher, with the three major indices notching a third day of gains, but disappointing results from Intel Corp (INTC.O) and IBM (IBM.N) weighed on the Dow, and to a lesser extent Nasdaq, for much of the session.
Intel slumped 2.51 percent to $21.79 while IBM lost 4.9 percent to $200.63. Both were among the biggest drags on the Dow and Nasdaq 100 .NDX.
M&T Bank (MTB.N) jumped 5.8 percent to $103.07 after posting third-quarter results, helping to lift the KBW Bank index .BKX 1.55 percent, while the S&P financial services index .GSPF rose 1.2 percent, the biggest gainer among the 10 S&P 500 sectors.
"It seems like it's a classic earnings period reaction. Either people are too exuberant and expectations are raised too high to beat when the actual number comes out or people are too pessimistic and the earnings are just not as low," said Rick Meckler, president of hedge fund LibertyView Capital Management in Jersey City, New Jersey.
The Dow Jones industrial average .DJI closed up 5.22 points, or 0.04 percent, at 13,557.00. The Standard & Poor's 500 Index .SPX rose 5.99 points, or 0.41 percent, at 1,460.91. The Nasdaq Composite Index .IXIC gained 2.95 points, or 0.10 percent, at 3,104.12.
European shares rose for a third consecutive session after Spain clung to its top credit rating, bolstering expectations the euro debt crisis can be contained.
"Spain is in a better place for now," said Richard Robinson, a fund manager at Ashburton who recently bought shares of Spanish bank Bankinter (BKT.MC) and Italian bank Intesa (ISP.MI) on prospects of improved euro zone economic problems.
The FTSE Eurofirst 300 index .FTEU3 of top European shares gained 0.5 percent to close at 1,118.62. MSCI's all-country world equity index .MIWD00000PUS rose 0.8 percent to 338.16, extending Tuesday's 1.2 percent gain.
The euro was up 0.54 percent at $1.3122, its highest since mid-September.
Bond losses accelerated after data showed that groundbreaking on new U.S. homes surged in September to its fastest pace in more than four years, another sign that the housing sector's budding recovery is gaining traction.
"The housing starts and permits are both up a ton. The market was already selling off, it started overnight with Moody's affirming Spain's investment grade rating," said James Newman, head of Treasuries and Agency trading at Keefe, Bruyette and Woods in New York.
U.S. benchmark 10-year Treasury notes fell 27/32 in price to yield 1.82 percent.
Brent crude futures fell further and U.S. crude turned lower in choppy trading after a report from the Energy Information Administration showed U.S. crude oil stocks rose more than consensus expectations last week.
December Brent settled down 78 cents to close at $113.22 a barrel. After trading lower for most of the session, U.S. oil futures for November delivery settled up 3 cents at $92.12. In after-hours trade, U.S. crude traded lower.
Spanish economy: r.reuters.com/pas57s
Spanish debt and bond yields: link.reuters.com/syb88s
(Additional reporting by Richard Hubbard in London; Editing by Chizu Nomiyama and Dan Grebler)