U.S. stocks climbed on Tuesday as stronger economic data fuelled gains in technology stocks, but the euro fell against the dollar on fears that the European debt crisis could engulf top-rated nations such as France.
Oil prices finished at a 16-week high after data showed U.S. retail sales in October rose more than forecast by economists, a sign that the world's largest economy started the fourth quarter with some vigour.
The recovery in stocks took some of the safe-haven appeal from U.S. Treasuries. In Europe, however, Italian bond yields climbed back to levels considered unsustainable, while the premium paid by 10-year French bonds over comparable German Bunds hit euro-era highs.
The economic numbers in the U.S. have improved, (but) everything in Europe is a matter of uncertainty, and the markets never like uncertainty, said Bryant Evans, investment adviser and portfolio manager at Cozad Asset Management in Champaign, Illinois.
The three major U.S. stock indices had a choppy morning but firmed in positive territory in the afternoon. The Nasdaq gained more than 1 percent as shares of Apple
With half an hour of trading remaining, the Dow Jones industrial average <.DJI> gained 85.68 points, or 0.71 percent, at 12,164.66. The Standard & Poor's 500 Index <.SPX> was up 12.24 points, or 0.98 percent, at 1,264.02. The Nasdaq Composite Index <.IXIC> was up 38.63 points, or 1.45 percent, at 2,695.85.
Still, in Europe the FTSEurofirst 300 <.FTEU3> index slipped 0.5 percent to end at 970.17.
The euro was 0.6 percent lower against the dollar at $1.354 as borrowing costs of troubled European countries rose again.
Italian 10-year bond yields rose above 7 percent, a level considered unsustainable for the country to fund its borrowing needs, given its sluggish economy. Spanish 10-year bond yields rose to 6.3 percent.
Many analysts believe the only option to stem the uncertainty is for the European Central Bank to buy large amounts of bonds without drying up liquidity from the purchases, in a strategy similar to the quantitative easing undertaken by the U.S. and UK central banks.
The ECB has continued its bond purchases but has repeatedly said it is up to individual governments to put their fiscal houses in order.
As long as the (ECB) continues to be unwilling to become the lender of last resort and really pull out the bazooka, you are going to continue to see these scares, said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York.
Yields on 10-year U.S. Treasuries initially fell below 2 percent as investors rushed to the perceived safety of U.S. government debt. As stocks recovered, however, the 10-year note's price fell 5/32, sending its yield up to 2.0626 percent.
U.S. crude oil prices gained 1.25 percent to settle at $99.37 a barrel, a 16-week high.
(Reporting and writing by Walter Brandimarte; Additional reporting by Edward Krudy and Caroline Valetkevitch in New York; Editing by Jan Paschal and Dan Grebler)