Wall St closes lower; gold climbs amid economic, geopolitical crosswinds

By Stephen Culp

NEW YORK (Reuters) -U.S. stocks vacillated on Thursday, swinging from red to green and back as investors contended with the push-pull of a strong economy and restrictive Federal Reserve policy.

Benchmark Treasury yields resumed their climb and gold added strength as ongoing turmoil in the Middle East bolstered the safe-haven play.

All three major U.S. stock indexes wavered throughout the session, with weakness in the chip sector weighing the Nasdaq down the most.

The S&P 500 joined the Nasdaq in the red, while the blue-chip Dow eked out a nominal gain.

All three indexes were on course for weekly declines.

New York Fed President John Williams, citing economic strength，said on Thursday he does not see a convincing case for cutting the central bank's policy rate now.

On Tuesday Fed Chair Jerome Powell declined to provide guidance on when rates might be lowered.

"Markets are still recalibrating what 'higher for longer' means and whether or not there will be any interest rate cut at all this year from the Fed," said Oliver Pursche, senior vice president at Wealthspire Advisors in New York.

"If four months ago I said there's a real possibility the Fed won't lower rates at all in 2024, the response would have likely been that will create a massive sell off in stocks," Pursche added.

"So why hasn't it? The reason is corporate earnings seem to be strong, the economy is continuing to perform well and inflation continues to cool down albeit in an uneven manner," he said.

A Reuters poll of 100 economists indicated the Fed will implement its first rate cut in September, and cut perhaps once more this year.

"Ultimately every central bank prefers being neutral in its policy stance as opposed to either accommodative or restrictive," Pursche said. "The Fed wants to be able to signal that they've done a good job and the best way to do that is to lower rates."

Economic data released on Thursday painted a mixed picture, with low jobless claims and solid factory data versus weaker-than-expected home sales and leading economic index readings.

The Dow Jones Industrial Average rose 22.07 points, or 0.06%, to 37,775.38, the S&P 500 lost 11.09 points, or 0.22%, to 5,011.12 and the Nasdaq Composite dropped 81.87 points, or 0.52%, to 15,601.50.

European stocks ended higher as upbeat results lifted the benchmark index, offsetting uncertainties surrounding geopolitical tensions and the timing of central bank rate cuts.

The pan-European STOXX 600 index rose 0.24%, while MSCI's gauge of stocks across the globe %.

Emerging market stocks rose 0.46%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.57% higher, while Japan's Nikkei rose 0.31%.

Treasury yields hovered near their highest levels since November as solid economic data reinforced warnings from Fed officials that the inflation cool-down might have stalled.

Benchmark 10-year notes last fell 12/32 in price to yield 4.6326%, from 4.585% late on Wednesday.

The 30-year bond last fell 16/32 in price to yield 4.7323%, from 4.699% late on Wednesday.

The dollar rose against a basket of world currencies as data affirmed the U.S. economy is on solid ground, supporting the notion that the Fed could delay its first rate cut.

The dollar index rose 0.19%, with the euro down 0.26% to $1.0643.

The Japanese yen weakened 0.15% versus the greenback at 154.62 per dollar. Sterling was last trading at $1.2436, down 0.08% on the day.

Crude oil prices held near a three-week low as mixed economic data was offset by U.S. sanctions on Venezuela and Iran and simmering Middle East tensions .

U.S. crude inched up 0.05% to settle at $82.73 per barrel, while Brent settled at $87.11 down 0.21% on the day.

Gold climbed as the safe-haven metal benefited from ongoing Middle East turmoil and the prospect of fewer than expected U.S. rate cuts this year.

Spot gold added 0.8% to $2,379.98 an ounce.

(Reporting by Stephen Culp; Additional reporting by Elizabeth Howcroft in London; Editing by Richard Chang, Mark Potter and Daniel Wallis)