By Lawrence Delevingne and Herbert Lash

(Reuters) -The benchmark U.S. Treasury yield on Monday pulled back after crossing 5% - a 16-year high - but stock indices were mixed and oil slipped amid continued fighting between Israel and Hamas.

Higher bond yields and the risk of a wider Mideast conflict soured investor sentiment at the start of a week full of major corporate earnings and key inflation data. A gauge of global equity markets fell to an almost seven-month low on the outlook.

The 10-year Treasury yield crossed just above 5% but then pulled back, falling to 4.850%. The recent surge in yields, which move inversely to prices, has been driven by an increase in government debt and supply of bonds around the world, as economic uncertainty leads investors to demand a greater premium to hold longer-dated bonds. [US/]

A steepening of the yield curve, where the 10-year's yield is rising and closing in on the higher two-year yield, suggest an economic slowdown in 2024, said Tom di Galoma, managing director and co-head of global rates trading at BTIG in New York.

"We're going to see a steeper yield curve and that's going to put pressure on long-term rates," di Galoma added. "In the next six to nine months we'll see a fairly extensive economic slowdown and that's what the market's pricing in."

The difference between yields on two- and 10-year notes, which shows the yield curve remains inverted with the short-end higher than longer-dated securities, was at -21.7 basis points.

Also roiling markets was the closing price of the S&P 500 slipping under its 200-day moving average on Friday, di Galoma said.

"That's a signal that equity markets are probably headed lower due to the slowdown and other geopolitical risks," di Galoma said in reference to the Mideast conflict.

MSCI's gauge of equity performance across the globe shed 0.16%, just off a low last seen in late March, while the pan-European STOXX 600 index lost 0.13%.

WALL STREET STOCKS

On Wall Street, major stock indices were mixed. The Dow Jones Industrial Average fell 0.58%, the S&P 500 lost 0.17% and the Nasdaq Composite added 0.27%. Futures imply that the Fed is done with tightening this cycle and are flirting with the chance of a quarter-point cut roughly by July 2024.

The jump in yields has also challenged equity valuations, dragging most major indexes lower last week, while the VIX "fear index" of U.S. stock market volatility hit its highest since March.

From an economic perspective, 5% is just another number but it resonates with investors, said Daiwa Capital chief economist Chris Scicluna.