By Herbert Lash
NEW YORK (Reuters) - Stocks on Wall Street retreated late on Friday over Ukraine jitters after surging to new highs on mostly positive economic data, while the euro hit its highest level this year as stable inflation cooled expectations of looser monetary policy.
The benchmark Standard & Poor's 500 stock index rose to an intraday record high after investors shrugged off a weaker-than-expected reading of U.S. gross domestic product for the fourth quarter.
But most stocks on Wall Street pared gains to trade near break-even to slightly higher late in the session, with Nasdaq stocks sharply lower.
"The market's gone straight south because there's chatter about Russia's (involvement) in Ukraine and that's getting people all jittery. It's sell first and ask questions later on a Friday afternoon," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
Jason Weisberg, managing director at Seaport Securities Corp in New York, said he does not see Ukraine tensions as cause to sell, "but if people are looking for a reason to sell, this will fit the bill."
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The Dow Jones industrial average rose 25.64 points, or 0.16 percent, to 16,298.29. The S&P 500 gained 2.23 points, or 0.12 percent, to 1,856.52 and the Nasdaq Compositedropped 18.43 points, or 0.43 percent, to 4,300.502.
U.S. gross domestic product expanded at a 2.4 percent annual rate in the fourth quarter, down sharply from the 3.2 percent pace estimated in January and below the 4.1 percent pace logged in the third quarter, the Commerce Department said.
But the pace of business activity in the U.S. Midwest rose slightly in February, beating expectations and snapping a three-month run of slower growth, the business barometer from the Institute for Supply Management-Chicago showed.
Also, contracts to buy previously owned U.S. homes edged up in January after a weather-related hit at the end of 2013, and U.S. consumer sentiment rose marginally in February even as concerns about extreme weather persisted, a survey showed.
"The million-dollar question is how much of the slowdown is because of the weather and how much is because of the economy getting weaker," said Bill Stone, chief investment strategist at PNC Wealth Management in Philadelphia, with $125 billion in assets under management.
"The market continues to believe that weather is behind most of it, and we generally agree with that, but we will need to see a pick-up" in growth, he added.
MSCI's all-country world equity index rose 0.32 percent, while stocks in Europe rebounded on the relatively stronger U.S. data.
Earnings have beaten expectations, helping lift the U.S. equity market.
"If you look at how numbers came in for the fourth quarter, they were really pretty good; the problem was guidance and outlook was not so great," said Daniel Morris, global investment strategist at TIAA-CREF.
Optimism at the beginning of the year that the economy would accelerate has been tempered by corporate caution, he said. Danish shipper A.P. Moller-Maersk , seen as a bellwether for the global economy as its vessels account for 15 percent of global container shipping, gave a cautious outlook when it reported results on Thursday, Morris said.
"Companies aren't jumping up and down saying ,'Hey, we're really optimistic.' That's what has weighed on the market."
European shares initially dipped as euro zone inflation data came in at 0.8 percent, 1/10th of a percentage point above expectations, lessening the prospect of new monetary stimulus measures from the European Central Bank.
The pan-European FTSEurofirst 300 index subsequently closed up 0.22 percent at 1,348.39.
The euro gained as traders had expected a slower pace of inflation in the euro zone and subsequent lower interest rates.
Major currency markets have been broadly stable as investors retreat from emerging markets to safer bets like the euro, dollar, yen and Swiss franc.
"The euro certainly looks good, everything is in place for more gains. But I wouldn't race out and buy it at the moment," said Graham Davidson, FX trader with NAB in London.
The euro rose 0.81 percent to $1.3819, its first time above $1.38 this year. The dollar slipped against the Japanese yen, falling 0.38 percent 101.72 yen.
Brent oil prices dropped below $109 a barrel as the revised GDP estimates curbed the demand outlook, but U.S. oil rose on market talk of decreased supply from the Bakken shale.
Crude oil loadings at a dozen major North Dakota rail terminals fell by more than 200,000 barrels on average in the past two days, data from industry intelligence provider Genscape showed.
Ukraine tensions and the new GDP estimates capped gains.
Brent crude rose 11 cents to settle at $109.07 a barrel. U.S. oil settled up 19 cents to $102.59.
U.S. COMEX gold futures for April delivery settled down $10.20 at $1,321.60 an ounce.
U.S. Treasury debt prices fell, reversing Thursday's gains, as stronger-than-expected economic data led to profit-taking and set the market on track for its biggest weekly loss in a month.
The revised downward estimate to GDP limited losses.
"This is profit taking because rates are so low that any news that works against bonds tends to bring an exaggerated reaction," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis.
The 10-year U.S. Treasury note fell 3/32 in price, pushing its yield up to 2.6547 percent.
GRAPHICS
U.S. fourth-quarter GDP: https://bsmedia.business-standard.comlink.reuters.com/guw34t
U.S. consumer sentiment: http://link.reuters.com/hem86v
Pending home sales: http://link.reuters.com/tax34t
(Reporting by Herbert Lash; Additional reporting by Jamie McGeever in London; Editing by Dan Grebler Editing by Leslie Adler)