NEW YORK (Reuters) - The dollar extended losses on Thursday, sparking a record surge in silver, but Wall Street rebounded in a late rally on bets a dose of poor economic data will not slow growth enough to derail the equity bull market.
Spot silver hit an all-time high of $49.51 an ounce as the dollar’s slide and yet another record in gold triggered heavy speculative buying in precious metals.
The dollar fell to a fresh three-year low against major currencies after the Federal Reserve on Wednesday signaled it planned to keep interest rates near zero. Softer-than-expected U.S. jobs and growth data underscored the bearish mood.
But Wall Street rallied, with a gauge of the U.S. transport sector closing at an all-time high in a sign of more gains ahead because of its role as a touchstone of economic demand.
The Dow Jones Transports .DJT rose 1.2 percent to 5510.06, led by railway Norfolk Southern (NSC.N), which jumped 8 percent to $73.87 after reporting strong results.
The Dow Jones industrial average and Standard & Poor’s 500 Index have rallied for six of the past seven sessions, while the Nasdaq this week surged to a 10-year high.
With trading volume weak and economic data suggesting a still unsteady path to recovery, it raises questions as to how much longer the equity market can maintain the rally.
“There is a disconnect in the market right now — we are getting this mixed bag of news,” said Jonathan Corpina, head of NYSE floor operations for Meridian Equity Partners in New York.
U.S. crude oil futures hit a 31-month high settlement in a volatile trading session that saw a weak dollar attract investors seeking alternative assets. U.S. monetary policy has encouraged investors to seek higher returns in riskier assets.
U.S. crude for June delivery settled up 10 cents at $112.86 a barrel. In London, ICE Brent June crude ended at $125.02, off just 11 cents for the session.
“The Fed did not give commodities traders any reason to think that the dollar’s fall will be stemmed, creating incentive to keep buying commodities,” said Stephen Schork, president at the Schork Group in Villanova, Pennsylvania.
The dollar was down 0.83 percent at 81.53 yen, while the U.S. dollar index .DXY, a basket of six currencies, fell to its lowest since July 2008, and was last off 0.55 percent at 73.116.
The euro rose to $1.4821, after hitting a 17-month high of $1.4882 on trading platform EBS.
Oil prices initially slipped on Commerce Department data that showed U.S. gross domestic product growth for the first quarter slowing to a 1.8 percent annual pace, or two-tenths of a percent less than markets had expected.
The Fed’s ultra-loose monetary policy has been a bane for the dollar. But low U.S. interest rates have been a boon for the euro, which is up nearly 11 percent this year.
On Wall Street, stocks at first faltered on the signs of slower growth, but investors said they needed to see more data before calling an end to the rally in equities.
The volatile weekly U.S. jobless numbers, which showed first-time claims for unemployment benefits jumped to 429,000 last week, well above a Reuters consensus forecasts of 392,000, may be a silver lining.
“At the moment, we regard the rise (in claims) as technical,” said Chris Rupkey, chief financial economist of Bank of Tokyo/Mitsubishi UFJ in New York.
“We need to see initial unemployment claims fall sharply below 400,000 in upcoming weeks to make sure the economy is not slowing due to the latest headwind of higher gasoline prices.”
Major world stock indexes had surged to near three-year highs on Wednesday after Fed policy-makers signaled low U.S. interest rates will remain in place for some time.
The MSCI index of world stocks .MIWD00000PUS was up 0.8 percent.
Spot silver was up 72 cents at $48.48 an ounce.
The benchmark 10-year U.S. Treasury note was up 12/32 in price to yield 3.32 percent.
Spot gold prices rose $8.75 to $1,535.10 an ounce.
Reporting by Richard Leong, Chuck Mikolajczak, Nick Olivari, Gene Ramos and Frank Tang in New York; Writing by Herbert Lash; Editing by James Dalgleish