New York - The United States dollar climbed to a seven-month high on Wednesday on optimism from stronger-than-expected US consumer spending, while Wall Street stocks resumed their march toward record highs despite some worries about the euro zone.
A weak Italian bond auction and disappointing data on euro zone factory output hurt the euro and pushed up borrowing costs for Italy and other debt-laden members of the 17-nation block. They also briefly lifted prices on safe-haven gold and US Treasuries.
Oil prices fell on a rise in US inventories and a mildly bearish report from a major energy agency.
The US government reported domestic retail sales grew 1.1 percent in February, the biggest rise since September. This raised hopes the world's biggest economy is gathering momentum and might expand more quickly than earlier thought.
“Strong activity numbers will help maintain investor expectations that the US economic recovery is best placed amongst G-3 to begin gaining traction this year,” said Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston.
The dollar index, which tracks the greenback versus a basket of currencies, was up 0.35 percent at 82.878. It climbed earlier to 83.055, the highest since August 3.
The euro was down 0.5 percent on the day to $1.2963. The single currency had hit a session low of $1.2922, the weakest since December 10.
The euro also fell after an Italian debt auction, seen as a gauge of investor confidence in the euro zone's third-biggest economy amid worries over whether its leaders could forge an effective parliament to tackle its fiscal problems.
Italy sold 5.32 billion euros of new three- and 15-year government bonds, paying the highest yield since last December for the shorter-term debt.
The yield on 10-year Italian government debt on the open market rose eight basis points to 4.66 percent.
The Italian auction results knocked European shares lower and remained a drag on Wall Street stocks even after the encouraging US retail sales data.
The upbeat news on consumer spending, together with data showing a bigger-than-expected rise in business inventories in January, caused some economists to upgrade their outlook on US economic growth in the first quarter.
US stocks opened lower and were in negative morning all morning before turning higher.
“Everything seems relatively tempered for a market that's been making new highs almost every day, and I think that's a relatively positive backdrop,” said Mark Lehmann, president at JMP Securities, an investment bank based in San Francisco.
In late-afternoon trading, the Dow Jones industrial average was up 2.90 points, or 0.02 percent, at 14,452.96. The Standard & Poor's 500 Index was up 1.08 points, or 0.07 percent, at 1,553.56. The Nasdaq Composite Index was up 0.34 points, or 0.01 percent, at 3,242.66.
The S&P 500 is within striking distance of its all-time closing high of 1,565.15 and about 1 percent away from an all-time intraday high of 1,576.09 - both set in 2007.
The rebound in US stocks boosted their European counterparts. The pan-European FTSEurofirst 300 share index inched into positive territory at the close, up 0.01 percent at 1,194.1l.
Tokyo's benchmark Nikkei index ended down 0.6 percent, dragging down MSCI's world equity index which was down 0.27 percent at 359.77.
The encouraging US retail sales data briefly pushed US government debt prices lower, but they bounced back after strong demand at a $21 billion 10-year auction. The benchmark 10-year Treasury note was unchanged in price to yield 2.017 percent.
In the commodity market, benchmark oil prices fell after a report from the International Energy Agency said US production would be enough to protect against most potential supply shocks.
Brent crude was down $1.29 or 1.18 percent at $108.36 a barrel, while US oil settled two cents, or 0.2 percent lower at $92.52, snapping a four-day day winning streak.
Gold prices fell, erasing early gains from the concerns about the euro zone, having already hit its highest level since February 28 at $1,598.20 on Tuesday.
Spot gold was last down 0.16 percent at $1,589.54 an ounce. - Reuters