(Corrects JPMorgan reference in paragraph 9 to show it largest by assets)
* Dow’s 10-day winning streak may come to a halt
* Dollar index retreats from seven-month high
* Reduced risk appetite boosts bond, gold prices
* Improving view on U.S. lifts Brent oil above $110/bbl
By Richard Leong
NEW YORK, March 15 (Reuters) - Wall Street stocks fell on Friday from near record levels as weaker bank shares led a pause in the market’s 10-day rally, while the dollar retreated from a seven-month high despite more signs the U.S. economy is strengthening.
With the pullback in U.S. stock prices, the Dow Jones industrial average was in danger of ending its recent winning streak, while European shares retreated from 4-1/2-year highs.
Investors shifted some money into safe-haven gold and U.S. and German government debt ahead of the weekend.
Evidence of an improving U.S. economy, together with supply concerns from the Middle East, boosted oil prices in London briefly back above $110 a barrel.
As the U.S. jobs picture brightens despite tax increases and government spending cuts, some analysts remain upbeat about the longer-term prospects for stocks.
“If we do get a little bit of a retracement it’s just a dip and all these dips are being met by investors looking to buy any kind of reversal they can get near,” said Gordon Charlop, managing director at Rosenblatt Securities in New York.
In addition to signs of the labor market picking up steam, data on Friday showed continued growth in U.S. manufacturing, although optimism was muted by news of a stronger-than-expected 0.7 percent rise in consumer inflation in February and a surprise deterioration in consumer confidence. [IED:nL6N0C7C07]
The Dow Jones industrial average was down 38.13 points, or 0.26 percent, at 14,501.01. The Standard & Poor’s 500 Index was down 1.83 points, or 0.12 percent, at 1,561.40. The Nasdaq Composite Index was down 5.15 points, or 0.16 percent, at 3,253.78.
The S&P 500 came within about 4 points of its record closing high on Thursday before falling on Friday on weakness in bank shares, led by JPMorgan.
Shares of the largest U.S. bank by assets fell on news the Fed told it and Goldman Sachs they must fix flaws in how they set capital payouts to stockholders. In addition, a Senate report alleged JPMorgan had ignored risks, misled investors, fought with regulators and tried to work around rules as it dealt with mushrooming losses in a derivatives portfolio.
Europe’s broad FTSEurofirst 300 index provisionally closed 0.43 percent lower at 1,202.65. But it recorded its fifth weekly rise and is hovering near its highest levels since mid-2008.
Earlier, Tokyo’s Nikkei index ended up 1.45 percent on the day, rising for a five weeks in a row.
MSCI’s all-world index, which tracks 9,000 stocks in 45 countries, was up 0.2 percent at 362.54. It was set to rise for a second straight week.
Weaker stock prices increased the appeal of bonds and gold. Benchmark 10-year U.S. Treasury notes were up 10/32 in price to yield 2.0017 percent, while German Bund futures were 0.17 percent higher at 143.38.
Gold inched up 0.23 percent to $1,593.44 an ounce, on its way to a weekly gain of 1 percent.
The dollar took a breather from its recent sprint higher, slipping 0.51 percent to a one-week low against a basket of major currencies. But it did reach the seven-month high touched on Thursday.
The euro rose 0.45 percent to $1.3063, recovering from Thursday’s three-month low of $1.2911, and was on course for a second consecutive weekly gain against the dollar.
Perceptions that U.S. inflation remains mild despite a spike in gasoline prices earlier this year have eased fears the Federal Reserve would need to consider an early exit from its aggressive quantitative easing policy that has helped support asset prices around the world.
“It looks like we still have some scope to continue with QE,” said Andrew Dilz, foreign currency trader at Tempus Consulting in Washington.
In the oil market, crude prices drew strength from the better U.S. economic outlook and concerns over supply from the Middle East.
U.S. crude oil gained 37 cents to $93.40 a barrel while Brent rose 82 cents a barrel to $109.78.
Supply worries resurfaced when President Barack Obama, ahead of a visit to Israel next week, said military force remained an option if sanctions and diplomacy failed to thwart Iran’s nuclear ambitions. (Additional reporting by Chuck Mikolajczak, Wanfeng Zhou in New York; Richard Hubbard, Clara Denina, Marc Jones and Marius Zaharia in London; Editing by Peter Graff, Giles Elgood and Dan Grebler)