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U.S. stocks higher in early trade, led by utilities

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Dollar dips after four sessions of gains

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U.S. Treasury yields pare declines after manufacturing

data

(Updates to mid-afternoon U.S. trading)

By Chuck Mikolajczak

NEW YORK, Jan 3 (Reuters) -

Global stocks rallied on Friday but stayed on track for a

weekly decline, while the dollar stalled after its recent rally

but found some support from a stronger-than-expected U.S.

manufacturing survey.

U.S. stocks scored strong gains, with both the S&P 500 and

Nasdaq up more than 1%, in an attempt to snap a five-session

streak of declines, their longest since mid-April. All 11 major

S&P sectors rose, led by consumer discretionary

stocks.

The U.S. currency rallied late last year as investors bet

President-elect Donald Trump's policies would drive growth and

inflation, meaning fewer interest rate cuts ahead from the

Federal Reserve and higher U.S. Treasury yields, while European

central banks are set to keep cutting rates.

The Fed's December policy statement led investors to reduce

expectations for the number and size of cuts from the central

bank in 2025.

"We continue to focus on growth and inflation as the two

principal capital market drivers and our initial view is

favorable towards traditionally more risky assets, meaning

viewing equities more favorably than fixed income at this point

in time as we position coming into the new year," said Bill

Northey, senior investment director at U.S. Bank Wealth

Management in Billings, Montana.

"Particular focus will continue to revolve around the

evolution of monetary policy and the interaction that we have

with what is going to be a changing legislative and

administrative agenda for the U.S. economy, but we do believe

that continues to set up favorably."

The Dow Jones Industrial Average climbed 327.59

points, or 0.77%, to 42,720.66, the S&P 500 rose 71.22

points, or 1.21%, to 5,939.77 and the Nasdaq Composite

climbed 319.55 points, or 1.66%, to 19,600.35.

MSCI's gauge of stocks across the globe

advanced 7.07 points, or 0.84%, to 847.00 - on track for its

biggest daily percentage gain since Dec. 24 - but still poised

for its third weekly decline in the past four.

In Europe, equities closed lower, with the pan-European

STOXX 600 index down 0.49%, weighed by luxury companies

and alcohol providers, but able to record a second straight

weekly gain.

Trading volume was light at the end of a holiday-shortened

week.

The dollar index, which measures the greenback

against a basket of currencies, fell 0.2% to 109 after briefly

paring losses as the Institute for Supply Management (ISM) said

a key manufacturing index increased more than expected 49.3 last

month, the highest reading since March, from 48.4 in November.

The greenback was on track for its biggest weekly percentage

gain since mid-November, up about 1.4%, and its fifth straight

week of gains, having hit a two-year high of 109.54 in the prior

session.

The euro was up 0.3% at $1.0296 but set for its fifth

straight weekly loss and its largest weekly percentage drop

since mid-November.

Against the Japanese yen, the dollar weakened 0.23%

to 157.15 while the British pound strengthened 0.29% to

$1.2416.

The yield on benchmark U.S. 10-year notes was up

1 basis point at 4.585%, also paring declines after the

manufacturing data. The yield remained above the 4.5% mark that

has proven problematic for equities after reaching an

eight-month high of 4.641% earlier this week.

U.S. crude jumped 1.2% to $74.01 a barrel and Brent

gained 0.82% to $76.55 per barrel, buttressed by colder

European and U.S. weather and additional economic stimulus

announced by China.