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Wall Street reverses some early gains

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Treasury yields rise, dollar stands firm

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Fed meets on Wednesday, rate cut expected

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U.S. retail sales, manufacturing production increase

(Updates prices at 2.43 pm ET)

By Isla Binnie

NEW YORK, Sept 17 (Reuters) - U.S. stock markets gave

back some early gains and the dollar firmed on Tuesday, as

strong economic data allayed slowdown fears ahead of a policy

meeting on Wednesday where the Federal Reserve is expected to

cut interest rates.

Signs of a slowing job market over the summer and more

recent media reports had contributed in the past week to betting

the Federal Reserve would move more drastically than usual,

shaving off half a percentage point, to head off any weakness.

Data on Tuesday showed U.S. retail sales rose in August and

production at factories rebounded. Stronger data could

theoretically weaken the case for a more aggressive cut.

"That points to a healthy state of the economy," said Peter

Cardillo, chief market economist at Spartan Capital Securities.

Cardillo expects Fed Chair Jerome Powell to cut rates by 25

basis points on Wednesday, and would be looking for clues to

future moves.

"He might hint the Fed could be more aggressive in the

coming meetings. ... I think they start off being cautious," he

said.

Across the broader market, traders are still betting on a

63% probability that the Fed will cut rates by 50 basis points

on Wednesday and a 37% probability of a 25 basis point cut,

according to CME Group's FedWatch tool.

The S&P 500 rose to an all-time intraday high at one

point in the session, but flattened in afternoon trading and was

last quoted down 0.01% at 5,632.63. The Dow Jones Industrial

Average fell 0.04% to 41,604.83.

The tech-heavy Nasdaq Composite bucked the trend

with a 0.15% rise to 17,618.86.

MSCI's All-World index was unchanged at

828.43.

"Everyone's pricing in the soft landing and it feels like

the Fed have been quite transparent that we're in a rate cutting

environment. Generally stocks have done well post those sort of

environments," said Eddie Kennedy, head of bespoke discretionary

fund management at Marlborough Investment Management.

STRONGER DOLLAR

The dollar perked up from its recent lows against most major

currencies on Tuesday. The index, which measures the

greenback against a basket of currencies, rose 0.22% to 100.92.

Beyond the United States, the Bank of England (BoE) and the

Bank of Japan (BOJ) also meet this week to discuss monetary

policy, but unlike the Fed are expected to keep rates on hold.

The dollar strengthened further against the Japanese yen

, gaining 0.92% to 141.9.

The two-year U.S. Treasury yield, which typically

reflects near-term rate expectations, stayed 3.7 basis points

higher at 3.5923%, having fallen to a two-year low of 3.528% in

the previous session.

The benchmark 10-year yield rose 2.1 basis

points to 3.642%, from 3.621% late on Monday.

In Asia, China's stuttering economic recovery continued to

weigh on sentiment after data over the weekend showed the

country's industrial output growth slowed to a five-month low in

August, while retail sales and new home prices weakened further.

Oil prices rose as the industry continued to survey the

impact of Hurricane Francine on output in the U.S. Gulf of

Mexico.

U.S. crude settled 1.57% higher at $71.19 a barrel.

Brent finished the day at $73.7 per barrel, up 1.31%.

Spot gold fell further, losing 0.44% to $2,571.17 an

ounce, having touched a record high on Monday.