NEW YORK - The U.S. dollar rose to a six-week high on Thursday on solid U.S. economic data, but remarks by the new Federal Reserve chief that there no evidence of an overheating economy pushed bond yields lower even as stocks wavered on Wall Street.
In his second testimony in Congress this week, Fed Chair Jerome Powell also told the Senate Banking Committee that the U.S. central bank did not see any evidence of a decisive advance in wages.
The remarks tempered market concerns from his testimony on Tuesday that sparked fears about a quicker pace of inflation.
Larry Hatheway, chief economist at GAM Investment Management in Zurich, said there was a lack of conviction in the market as U.S. stocks traded above and below break-even and bond yields pulled back from a recent march higher.
Trading was algorithmic or related to positioning, he said, as the market was pulled by inflation concerns on the one hand and sharply higher expectations for earnings growth that strong global growth was driving.
"I don't think that there are very many people who take a fundamental view on markets who are changing their views much. They're all sitting back and basically watching but not acting," Hatheway said.
The dollar index, tracking the U.S. unit against a basket of major currencies, was flat, with the euro up 0.16 percent to $1.2212. The Japanese yen weakened 0.25 percent versus the greenback at 106.97 per dollar.
MSCI's gauge of stocks across the globe shed 0.25 percent, but the pan-European FTSEurofirst 300 index of leading regional shares lost 1.26 percent to close at a provisional 516.59.
The Dow Jones Industrial Average fell 46.77 points, or 0.19 percent, to 24,982.43. The S&P 500 lost 3.23 points, or 0.12 percent, to 2,710.6 and the Nasdaq Composite dropped 5.92 points, or 0.08 percent, to 7,267.09.
Comments by New York Fed President William Dudley stoked the embers of rate-hike fears during remarks in Sao Paulo, Brazil, where he said four rate hikes - or one more than the Fed has forecast this year - would be gradual.
The gap between short-dated U.S. borrowing costs and those in Germany was at its widest in over 20 years as the monetary policy outlooks by the Fed and European Central Bank for the two regions diverged.
U.S. consumer prices increased in January as a gauge of underlying inflation posting its largest gain in 12 months, but a survey showed the euro zone's factory boom slowed a little further in February, pressuring euro zone yields lower.
"In the U.S. we have at least three rate hikes this year, but in the euro zone, there was some exaggeration about where inflation was heading so that is now being priced out and yields are moving to the downside," said DZ Bank strategist Daniel Lenz.
Oil fell more than 1 percent, hitting two-week lows on pressure from a strong dollar and worries that surging U.S. crude output might thwart efforts by the Organization of the Petroleum Exporting Countries to drain global supply.
U.S. crude fell 57 cents to $61.07 per barrel and Brent was last at $63.98, down 75 cents on the day.