GLOBAL MARKETS-Wall St slips after early rise; dollar cuts gains

Wed Mar 26, 2014 3:01pm EDT

* Dow, S&P 500 and Nasdaq all down, giving back early gains

* Wall St up initially as Crimea tensions faded

* Dollar up, euro down; bond yields rise after 5-year auction

* Emerging-market stocks rise, gold near 5-week low

By Barani Krishnan

NEW YORK, March 26 (Reuters) - U.S. stocks fell on Wednesday, led by renewed selling pressure in technology shares, while the dollar pared gains after an earlier rally on strong U.S. economic data.

U.S. Treasury debt prices extended gains after the government sold $35 billion in new five-year notes amid strong demand from fund managers and other investors.

Gold remained near 5-week lows on a lack of physical bullion buying.

Wall Street opened higher, trending with global equity markets, after U.S. President Barack Obama and his allies agreed to hold off on more damaging economic sanctions unless Moscow goes beyond the seizure of Crimea. Russia has already drawn a line in the crisis, saying it did not plan further incursions into Ukraine.

But by late afternoon, the Dow Jones industrial average, the Standard & Poor's 500 Index and the Nasdaq Composite Index were all in the red as investors' moods dimmed, similar to the past two sessions when volatile trading ruled.

"From a fundamental standpoint, people are not sure if growth can be sustained with many continuing headwinds, i.e., the Russia-Ukraine rhetoric; off-again, on-again concerns about China, and the approaching quarter-end profit-taking in biotech and momentum stocks," said Adam Sarhan of Sarhan Capital in New York.

At 2:58 p.m. EDT, the Dow Jones industrial average was down 28.19 points, or 0.17 percent, at 16,339.69. The Standard & Poor's 500 Index was down 2.91 points, or 0.16 percent, at 1,862.71. The Nasdaq Composite Index was down 26.73 points, or 0.63 percent, at 4,207.54.

Stocks in the S&P healthcare and telecom sectors, which had led the morning rally, had sharply pared their early gains by mid-afternoon.

Among technology shares, Facebook fell 5.9 percent to $61.12. The Nasdaq biotech index slid 1.4 percent, and was down 4 percent for the week so far for its worst week since mid-October.

While China is a concern, some investors are also counting on Beijing taking steps to bolster its economy. There is a growing bet that China will launch stimulus measures as economists expect the No. 2 economy to miss the government growth target of 7.5 percent this year.

"Investors are betting on stimulus because Chinese authorities have done everything they could to achieve the target in the past," said Sho Aoyama, senior market analyst at Mizuho Securities.

European stocks ended in positive territory for a second day. London's FTSE finished flat while Germany's DAX rose 1.2 percent and France's CAC gained 0.9 percent.

The MSCI emerging equities index climbed 1 percent, its biggest gain in almost three weeks, helped by the recovery in Russian stocks and in Poland and Hungary . Both had been hit by the recent turbulence.

In the latest snapshot of the U.S. economy, orders for durable goods rose more than expected in February, ending two straight months of declines. Financial data firm Markit's preliminary composite Purchasing Managers Index showed that private-sector economic activity accelerated in March at a faster clip than in February as the services sector picked up.

The stronger U.S. data initially bolstered the dollar index while the euro fell on investor caution as European Central Bank officials ramped up efforts to talk down the currency.

ECB governing council member and Bundesbank chief Jens Weidmann said negative interest rates were an option to temper euro strength. He added that quantitative easing was not out of the question to combat deflation.

The euro traded lower for a second straight day at $1.3790 , not far from the three-week trough of $1.3749 hit on Tuesday. It was also lower against the yen at 141.08.

By mid-afternoon, the dollar index was up just 0.1 percent, scaling back from an earlier gain of as much as 0.3 percent.

U.S. Treasuries yields fell slightly after an auction for five-year notes that took in $35 billion.

"It was well received. There was a very low dealer takedown ... it looks like there was a lot of fund demand and demand from abroad," said Gennadiy Goldberg, an interest-rate strategist at TD Securities in New York.

The benchmark 10-year U.S. Treasury note was up 9/32, its yield at 2.70009 percent.

Two- and five-year notes have been the worst performers since Federal Reserve Chair Janet Yellen said last Wednesday that the U.S. central bank could raise interest rates six months after its current bond-buying program ends, suggesting a potential rate hike as early as the spring of 2015.

In precious metals trading, spot gold was at $1,301.69 an ounce after plumbing a new 5-week bottom of $1,300.09. (Additional reporting by Alistair Smout in London and Hideyuki Sano in Tokyo; Editing by Larry King, Dan Grebler and Jan Paschal)

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