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U.S. stocks close higher; S&P, Nasdaq snap losing streak

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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 with close of U.S. markets)

By Chuck Mikolajczak

NEW YORK, Jan 3 (Reuters) - Global stocks rallied on

Friday but remained 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 secured strong gains, with both the S&P 500 and

Nasdaq up more than 1% to snap a five-session streak of

declines, their longest since mid-April. All 11 major S&P

sectors rose, led by a 2.42% jump in 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.

"The nice thing about today's attempt is that it's kind of

persisting into the afternoon even though yields are a couple

basis points higher across the curve so it's not like it's

coming from just relief on the Treasury yield front that could

be reversed next week," said Ross Mayfield, investment

strategist at Baird in Louisville, Kentucky.

"A lot of this weakness over this month has been related to

higher yields and a higher dollar so it's nice to see the kind

of follow through today even on a day where yields are kind of

holding firm."

The Dow Jones Industrial Average rose 339.86

points, or 0.80%, to 42,732.13, the S&P 500 rose 73.92

points, or 1.26%, to 5,942.47 and the Nasdaq Composite

rose 340.88 points, or 1.77%, to 19,621.68.

For the week, the S&P 500 shed 0.48%, the Nasdaq fell 0.51%

and the Dow lost 0.6%.

MSCI's gauge of stocks across the globe

advanced 7.52 points, or 0.90%, to 847.45 - on track for its

biggest daily percentage gain since Nov. 7 - 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 0.29% to 108.90 after

briefly paring losses as the Institute for Supply Management

(ISM) said a key manufacturing index increased more than

expected to 49.3 last month, the highest reading since March,

from 48.4 in November.

The greenback was poised for its fifth straight week of

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

session.

The euro was up 0.43% at $1.0309 but set for its

fifth straight weekly loss and its largest weekly percentage

drop since mid-November.

Against the Japanese yen, the dollar weakened 0.15%

to 157.29 while the British pound strengthened 0.36% to

$1.2424.

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

2.7 basis points at 4.602%, 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.

Richmond Federal Reserve bank president Tom Barkin said the

central bank's benchmark policy rate should stay restrictive

until it is more certain that inflation is returning to the

Fed's 2% target.

U.S. crude jumped 1.13% to settle at $73.96 a barrel

and Brent settled up 0.76% to $76.51 per barrel,

buttressed by colder European and U.S. weather and additional

economic stimulus announced by China.