U.S. stocks rebound on financials, oil falls

By Herbert Lash

NEW YORK (Reuters) - U.S. stocks rose late on Friday after a rebound in bank shares offset fears stemming from a bleak U.S. jobs report that had sunk equity markets earlier and led investors into safe-haven debt.

The U.S dollar retreated from 11-month highs after government data showed the U.S. economy lost jobs for the eighth straight month in August and the unemployment rate jumped to nearly a five-year high.

Evidence of slowing global demand helped push crude oil down to a fresh five-month low and hammered industrial metals after a hefty rise in copper inventories triggered a sell-off.

Copper and aluminum tumbled to seven-month lows, lead and tin prices shed about 5 percent and grain prices in Chicago fell almost as sharply. Crude's fall to around $106 a barrel extended the week's losses to about 8 percent.

The MSCI main world equity index .MIWD00000PUS fell 6.2 percent for the week, its biggest weekly decline in more than five years.

News that the U.S. unemployment rate soared to 6.1 percent last month from 5.7 percent in July initially rattled investors who dumped shares and fled to the safety of government debt.

European shares closed down more than 2 percent and U.S. stocks fell more than 1 percent before rebounding on news that said two private equity firms were each looking to buy parts of Lehman's LEH.N real estate and asset management units.

The Reuters report, based on sources familiar with the situation, sparking a broad rebound in financial stocks.

The top five gainers in the S&P 500 Index were banks, and the S&P financial index .GSPF climbed 3.2 percent.

"We got the bad news on payrolls and the unemployment rate this morning, but given the fact we were down so much yesterday we're seeing a bit of a reflex rally with investors wanting to take advantages of some of the bargains," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.

The Dow Jones industrial average .DJI closed up 32.73 points, or 0.29 percent, at 11,220.96. The Standard & Poor's 500 Index .SPX rose 5.48 points, or 0.44 percent, at 1,242.31. The Nasdaq Composite Index .IXIC fell 3.16 points, or 0.14 percent, at 2,255.88.

European stocks capped their biggest weekly decline in more than five years, with banks and energy stocks among the top-weighted losers.

The FTSEurofirst 300 .FTEU3 index of top European shares lost 2.2 percent at 1,125.48 points.

Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz) fell nearly 10 percent after the world's top mobile phone maker warned it would lose market share this quarter as it refused to participate in a price war waged by some rivals to combat weak economies.

Banks, miners and energy shares were among top-weighted losers on the index, with commodity stocks also facing pressure from a sharp decline in prices of metals and crude.  Continued...