NEW YORK Wall Street and the dollar fell following weaker-than-expected U.S. economic data on Monday that suggested the Federal Reserve may not be raising interest rates in the near future.
The dollar reversed earlier gains and moved lower after U.S. consumer spending data that indicated a cooling economy and weak first-quarter gross domestic product growth.
Monday's weaker-than-expected consumer spending, as well as a downward adjustment to January's numbers and weak readings for personal income and inflation, suggested the Fed may stay on hold through its next two meetings in April and June.
"Because we had softer (personal consumption expenditures) data and also the big downward revision in spending in January, that is causing a lot of the (dollar) long trades that many have put on to be cut back," said Kathy Lien, managing director at BK Asset Management in New York.
"Today's report certainly raises the question of whether the Fed can pull the trigger in June."
Higher interest rates increase the strength of the dollar by making it more attractive to investors, but a strong dollar can weigh on the returns of firms that do business overseas, hurting earnings.
The dollar index .DXY fell 0.3 percent against a basket of six major currencies, falling to 95.861. It had risen as high as 96.339 prior to the data, its highest in almost two weeks.
U.S. stocks opened higher but turned down as investors digested the data, with the energy sector lower as oil prices slipped.
The Dow Jones industrial average .DJI fell 17.15 points, or 0.1 percent, to 17,498.58, the S&P 500 .SPX lost 3.26 points, or 0.16 percent, to 2,032.68 and the Nasdaq Composite .IXIC dropped 10.61 points, or 0.22 percent, to 4,762.90.
Japanese shares rose overnight, with the Nikkei index up 0.77 percent to close at 17,135 yen.
With share markets in Australia, New Zealand and Hong Kong closed for holidays, the MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was flat.
MSCI's measure of emerging markets stocks .MSCIEF rose by around 0.1 percent in thin trading. MSCI's index of world shares .MIWD00000PUS gained 0.11 percent.
Bond prices briefly rose in the wake of the U.S. data before turning flat, with yields on benchmark U.S. 10-year Treasuries falling below 1.9 percent.
Gold XAU= also rose on the day, gaining 0.19 percent to $1218.46 an ounce after touching a one-month low of $1.208.90 an ounce.
Oil prices, which have risen about 50 percent since multi-year lows hit in January, turned lower in thin trading.
U.S. crude futures CLc1 fell 1.1 percent to $39.04 per barrel, and Brent LCOc1 lost 1.4 percent to $39.87.
Fed Chair Janet Yellen and other Fed policymakers are expected to speak on Tuesday, making the U.S. central bank's policy the biggest focus for now. [FED/DIARY]
Given that money markets <0#FF:> are pricing in only about a 50-percent chance of a rate hike by the Fed in June, with hardly any likelihood of an April hike factored in, any signs of a tightening in the next quarter could rattle financial markets.
(Reporting by Dion Rabouin; Editing by Nick Zieminski)
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