US stocks turn lower, dollar gains as markets parse central bank cautions

NEW YORK (Reuters) - U.S. stocks turned lower and the dollar strengthened on Thursday as investors weighed solid data against notes of caution from world central bank leaders regarding mounting economic uncertainties stemming from U.S. President Donald Trump's erratic tariff policies.

Geopolitical tensions heated up with reports of huge blast triggered by a Ukrainian drone attack on a Russian airfield.

U.S. data showed jobless claims holding steady and an unexpected increase in existing home sales, which helped calm fears that the economy is softening, despite the U.S. Federal Reserve's lowered economic projections released on Wednesday.

Gold also eased and crude prices advanced as the afternoon progressed.

"It's a pretty odd day," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "There's a lot of noise out there. Sitting on your hands might be the best thing to do right now."

Straight on the heels of the Fed's decision to hold rates, the Bank of England (BoE) followed suit while also cautioning against assumptions it would cut rates in the near future as it grapples with economic uncertainties.

The Swiss National Bank cut its rate to near zero but flagged increasing worries over the global impact of Trump's trade policies, while Sweden's central bank predicted it would keep current rates in place in the near term and remain agile in its response to global economic developments.

"(Central banks are) probably right to feel cautious," Pavlik added. "The Trump team has instituted a playbook that no one can quite figure out yet and they're all playing defense."

Turkey's central bank, on the other hand, hiked its overnight lending rate to 46% on an interim basis after the lira plunged in the wake of the arrest of President Tayyip Erdogan's main political rival.

The Dow Jones Industrial Average fell 81.67 points, or 0.19%, to 41,882.96, the S&P 500 fell 27.86 points, or 0.49%, to 5,647.22 and the Nasdaq Composite fell 123.95 points, or 0.70%, to 17,626.84.

European stocks closed lower after central banks across the continent flagged economic uncertainty amid a looming possibility of global trade war.

MSCI's gauge of stocks across the globe fell 3.47 points, or 0.40%, to 841.90.

The pan-European STOXX 600 index fell 0.43%, while Europe's broad FTSEurofirst 300 index fell 9.08 points, or 0.41%.

Emerging market stocks fell 3.30 points, or 0.29%, to 1,140.01. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.16% lower at 592.98, while Japan's Nikkei fell 93.54 points, or 0.25%, to 37,751.88.

The greenback advanced after the Fed indicated it was in no rush to cut its key policy rate, while the pound remained soft in the wake of the BoE's decision to stand pat.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.47% to 103.87, with the euro down 0.51% at $1.0845.

Against the Japanese yen, the dollar strengthened 0.09% to 148.81.

In cryptocurrencies, bitcoin fell 1.58% to $84,027.59. Ethereum declined 3.12% to $1,971.42.

U.S. Treasury yields weakened after Fed Chair Jerome Powell indicated that the central bank is poised to act in the case of an economic slowdown.

The yield on benchmark U.S. 10-year notes fell 2.1 basis points to 4.235%, from 4.256% late on Wednesday.The 30-year bond yield fell 1.2 basis points to 4.5545% from 4.567% late on Wednesday.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 2.2 basis points to 3.957%, from 3.979% late on Wednesday.

Oil prices rose after the United States imposed new Iran-related sanctions and as renewed tensions in the Middle East fueled supply concerns.

U.S. crude rose 1.64% to settle at $68.26 per barrel, while Brent settled at $72.00 per barrel, up 1.72% on the day.

Gold prices paused after the safe-haven metal touched all-time highs earlier in the session.

Spot gold fell 0.16% to $3,042.38 an ounce. U.S. gold futures rose 0.15% to $3,040.60 an ounce.

(Reporting by Stephen Culp; Additional reporting by Marc Jones in London; Editing by Joe Bavier, Kirsten Donovan)