NEW YORK (Reuters) - U.S. Treasury yields fell on Friday after weak U.S. data on retail sales and consumer sentiment, while oil and gold prices also fell with bullion headed for its worst week in two months as concerns eased about a potential strike against Syria.
Most U.S. and European stock indexes rose, though an index for global stocks hugged break-even as investors looked ahead to next week's key policy meeting of the U.S. Federal Reserve.
Analysts expect the Fed to begin to dial back its $85 billion a month in bond purchases, a program that has restrained interest rates and boosted the price of risk assets.
U.S. consumer confidence ebbed early this month and retail sales advanced just slightly in August, the latest indications of an economy barely chugging ahead.
The sluggish pace of activity was underscored by another report on Friday showing an energy-led rise in wholesale prices last month, with underlying inflation pressures subdued.
The soft data was unlikely to deter the Fed from cutting its massive bond-buying program as early as next week, analysts said.
U.S. stocks will remain range-bound until after the Fed meeting and the ongoing U.S.-Russian talks on Syria and the looming fiscal crisis in Washington are resolved, said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.
"The data coming out is too good to allow (the market) to fall very far," but there is little clarity to help push it much higher, Paulsen said.
The Dow Jones industrial average <.DJI> was up 71.35 points, or 0.47 percent, at 15,371.99. The Standard & Poor's 500 Index <.SPX> was up 4.33 points, or 0.26 percent, at 1,687.75. The Nasdaq Composite Index <.IXIC> was up 4.60 points, or 0.12 percent, at 3,720.57.
Bond prices sold off overnight and the dollar staged a rally on a report in Japan's Nikkei business daily that former Treasury Secretary Lawrence Summers would soon be named the Fed's new chief to replace Ben Bernanke.
While traders had doubts about the source of the report, analysts said the market reaction highlighted the sensitivity of investors to the possibility of Summers taking over the Fed.
Investors say he might tighten monetary policy more quickly than the other main candidate, Fed Vice Chair Janet Yellen.
Asked about the story, a White House spokeswoman said Obama had not made his decision about the Fed job.
MSCI's measure of global shares <.MIWD00000PUS> rose 0.12 percent, and its emerging markets index <.MSCIEF> fell 0.4 percent.
European equities advanced for a second straight week and set a 3-1/2-month high, with merger and acquisition activity in the healthcare and media sectors underpinning the market.
The FTSEurofirst 300 index <.FTEU3> leading European shares rose 0.24 percent to close at 1,250.26.
Gold was down 5.4 percent for the week, the worst since June, after heavy selling linked to the expectations of a Fed rollback and an easing of tensions over Syria. Gold was quoted at $1,308.74 an ounce, down 0.9 percent, and has now declined by about 21 percent this year after 12 consecutive annual gains.
"This is almost certainly the pricing in of the expectations of QE tapering," Mitsubishi analyst Jonathan Butler said.
The dollar was up 0.05 percent against a basket of major currencies <.DXY> while 10-year U.S. Treasury yields fell to 2.8883 percent, up 4/32 in price.
Investors generally expect the Fed to announce a tapering of its bond purchases next week in response to signs of strength in the U.S. economy, but the pace of future cutbacks is less clear.
"In the coming months, given that the new Fed chairman starts in January, the Summers effect, if it is announced, could be as dominant" as the Fed's tapering decision, said Mike Gallagher, managing director of IDEAglobal.
Gallagher said the combination of a Fed tapering decision next week and the prospect of Summers becoming chairman could set U.S. Treasury 10-year yields on a course toward 3.5 percent by year's end. Such a move would hit other markets hard, as many expect the benchmark 10-year yield, which moves inversely to the price of the bond, to remain around 3 percent.
A successful Summers nomination is far from certain, and any appointment must be approved by the U.S. Senate.
Brent crude oil fell, on track for its steepest weekly decline since June, as fears receded about an imminent military strike on Syria as Russia and the United States agreed on a new push to negotiate an end to that country's civil war.
Brent was down about 3.5 percent since last Friday. The international benchmark has slid about $5 a barrel since the end of August, when it jumped above $117 amid worries that a possible U.S. attack on Syria could lead to more violence in a region that pumps around a third of the world's oil.
The Brent crude futures contract for October, which expires on Friday, fell 40 cents to $112.23 a barrel, and U.S. crude shed 83 cents to $107.77 a barrel,
(Reporting by Herbert Lash; Editing by Leslie Adler)
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