NEW YORK, June 13 (Reuters) - Wall Street stocks were mixed in choppy trading on Thursday and U.S. Treasury yields touched their lowest since early April as investors reconciled cooler-than-expected inflation data with tempered rate cut expectations from the Federal Reserve.
The dollar edged higher against a basket of world currencies as the Fed's hawkishness and possibility of a Europe-China tariff war sent European stocks sharply lower.
Among the three major U.S. stock indexes, the Nasdaq was buoyed by tech strength, while the S&P 500 inched back from Wednesday's record closing high.
The blue-chip Dow was decisively lower.
The Labor Department's Producer Prices Index (PPI) was significantly lower than analysts had expected, dipping 0.2% on a monthly basis, while rising 2.2% year-on-year, or 20 basis points above the Fed's 2% annual inflation target.
"We're getting further evidence this morning, sort of confirmatory evidence this morning from PPI that we got from CPI yesterday," Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina. "We're seeing continuing progress and investors getting more confident that the Fed is not going to have to leave right at 5.5% forever and ever."
In another report, initial jobless claims touched a 10-month high.
The data followed Wednesday's cooler-than-expected CPI report and the Fed's revised dot plot, which lowered rate cut expectations this year from three to one.
However, expectations that the U.S. central bank could implement its first rate cut as soon as September are on the rise.
Financial markets now see a 61.1% likelihood of a 25-basis-point reduction to the Fed funds target rate in September, according to CME's FedWatch tool.
The Dow Jones Industrial Average (.DJI), opens new tab fell 249.48 points, or 0.64%, to 38,462.73. The S&P 500 (.SPX), opens new tab lost 4.78 points, or 0.09%, at 5,416.25 and the Nasdaq Composite (.IXIC), opens new tab added 44.48 points, or 0.25%, at 17,652.91.
European shares fell sharply as investors digested lowered rate cut expectations, political turmoil from recent and upcoming elections, and a possible tariff war against China.
The pan-European STOXX 600 index (.STOXX), opens new tab lost 1.25% and MSCI's gauge of stocks across the globe (.MIWD00000PUS), opens new tab shed 0.45%.
Emerging market stocks rose 0.64%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab closed 0.7% higher, while Japan's Nikkei (.N225), opens new tab lost 0.40%.
U.S. 10-year Treasury yields dipped after the soft economic data.
Benchmark 10-year notes last rose 5/32 in price to yield 4.2771%, from 4.295% late on Wednesday.
The 30-year bond fell 1/32 in price to yield 4.4519%, versus 4.45% late on Wednesday.
The dollar index (.DXY), opens new tab rose 0.41%, with the euro down 0.41% to $1.0763.
The Japanese yen weakened 0.17% to 157.00 per dollar, while Sterling was last trading at $1.276, down 0.28% on the day.
Oil prices nudged higher as data suggested price pressures could be easing.
U.S. crude rose 0.19% to $78.65 per barrel and Brent was last at $82.98, up 0.46% on the day.
Gold prices moved lower in opposition to the dollar in following the weaker than expected PPI report.
Spot gold dropped 0.4% to $2,312.79 an ounce.
Reporting by Stephen Culp; Additional reporting by Marc Jones in London; Editing by Richard Chang
