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All three major U.S. indexes on track for monthly declines
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PCE inflation data inline with expectations
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ECB policymakers keep rate hikes on the table
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Oil prices jump on supply concerns
(Updates to U.S. market open, changes dateline to NEW YORK from LONDON)
By Stephen Culp
NEW YORK, Aug 31 (Reuters) - Wall Street extended its rally and the dollar rebounded on the last trading day of August, as closely-watched inflation data offered few surprises and bolstered the likelihood that the Federal Reserve will press the policy pause button at next month's monetary policy meeting.
All three major U.S. stock indexes appeared set to extend their winning streaks, adding a fifth consecutive day of gains.
"We're seeing a continuation of the rally after the recent pullback," said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. "The pullback in August was healthy, and a natural course of action, with the markets stabilizing from last year."
All three indexes remain on course to notch losses for the month, with the S&P 500 suffering its biggest percentage drop since February and the tech-laden Nasdaq clocking its largest slide this year.
Among a smattering of U.S. economic reports, the Commerce Department's closely watched Personal Consumption Expenditures (PCE) price index - the Fed's preferred inflation yardstick - nailed consensus, soothing fears of an upside surprise, which could have helped provoke yet another interest rate hike in September.
"The Fed has indicated another 25-basis-point rate hike this year could be in the cards," Keator added. "But with some of the benign inflation data that has come out recently, accompanied by the fact that Powell indicated that the moves that the Fed has made over the last year an a half will take time to move through the system, it lends itself to our believe that if the Fed increases this year it will happen in the latter part of the year."
The Dow Jones Industrial Average rose 118.89 points, or 0.34%, to 35,009.13, the S&P 500 gained 15.7 points, or 0.35%, to 4,530.57 and the Nasdaq Composite added 84.47 points, or 0.6%, to 14,103.78.
European shares advanced with a boost from financials after UBS's decision to absorb Credit Suisse's domestic bank, and their gains solidified after the PCE data release.
The pan-European STOXX 600 index rose 0.20% and MSCI's gauge of stocks across the globe gained 0.12%.
Emerging market stocks lost 0.67%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.39% lower, while Japan's Nikkei rose 0.88%.
The greenback gained ground against a basket of world currencies in the wake of U.S. economic data, while the euro sagged following cautious comments by a leading European Central Bank hawk.
The dollar index rose 0.52%, with the euro down 0.75% to $1.0842.
The Japanese yen strengthened 0.07% versus the greenback at 146.15 per dollar, while sterling was last trading at $1.2652, down 0.52% on the day.
U.S. Treasury yields were little changed in choppy trading after data reinforced expectations that the Fed will hold interest rates steady in September.
Benchmark 10-year notes last rose 5/32 in price to yield 4.0984%, from 4.118% late on Wednesday.
The 30-year bond last rose 18/32 in price to yield 4.1949%, from 4.228% late on Wednesday.
Oil prices jumped, boosted by a U.S. inventory drawdown and production cuts by the OPEC+ group of oil producing nations.
U.S. crude rose 1.94% to $83.21 per barrel and Brent was last at $86.81, up 1.11% on the day.
Gold prices were little changed in the wake of the PCE report.
Spot gold was essentially flat, at $1,941.89 an ounce.
(Reporting by Stephen Culp; editing by David Evans)
