By Sinead Carew
NEW YORK (Reuters) - Treasury yields were lower on Friday after muted underlying U.S. inflation data offset higher gasoline prices and strong retail sales while the U.S. dollar regained ground but was set for its worst week in five.
Stocks on major world markets, however, hit their fourth record high in a row, with Wall Street moving higher as some investors bet the inflation data could curb future rate hikes while others eyed trade discussions and retail data.
U.S. consumer prices recorded their biggest increase in eight months in September as gasoline prices soared in the wake of hurricane-related refinery disruptions, but underlying inflation remained muted.
U.S. retail sales recorded their biggest increase in 2-1/2 years in September as demand rose for building materials and motor vehicles in areas hurt by hurricanes Harvey and Irma.
Wall Street had a variety of drivers ranging from trade talks, which helped the materials sector, to oil prices, which boosted the energy sector, and retail data that helped consumer stocks, according to Tim Ghriskey, chief investment officer of Solaris Asset Management in New York.
"It’s a risk-on day,” he said also citing a jump in technology stocks. “You've multiple levers here in multiple sectors. Earnings is almost taking a back seat today."
The Trump administration is seeking to use NAFTA to propose automotive content rules that require the use of North American-made steel, aluminum, copper and plastic resins according to a Reuters report citing three unnamed sources.
The Dow Jones Industrial Average rose 44.28 points, or 0.19 percent, to 22,885.29, the S&P 500 gained 4.63 points, or 0.18 percent, to 2,555.56 and the Nasdaq Composite added 19.10 points, or 0.29 percent, to 6,610.61.
European shares rose to their highest in nearly four months, helped by corporate earnings updates.
The pan-European FTSEurofirst 300 index rose 0.22 percent and MSCI's gauge of stocks across the globe gained 0.29 percent.
The dollar was little changed against major currencies in the late afternoon, shaking off early weakness from the inflation data. [L2N1MO1IL]
"We did see a knee-jerk reaction that was perhaps overdone. On more sober reflection, traders are coming to bid up the dollar," said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.
The U.S. dollar index rose 0.03 percent, with the euro down 0.1 percent to $1.1817. [L8N1MO3VA]
European Central Bank policymakers broadly agreed to extend asset purchases at a lower volume at their October policy meeting with views converging on a nine-month extension, sources at the central bank told Reuters.
Benchmark 10-year U.S. Treasury notes were last up 12/32 in price to yield 2.2819 percent, from 2.323 percent late on Thursday. The 30-year bond was last up 25/32 to yield 2.8144 percent, from 2.853 percent Thursday.
Oil prices firmed on Friday as bullish news from strong Chinese oil imports to turmoil in the Middle East put Brent on track for a nearly 2.8 percent weekly gain. U.S. crude was on track for its fifth weekly gain out of six weeks.
U.S. crude rose 1.54 percent to $51.38 per barrel and Brent was last at $57.11, up 1.53 percent.
Spot gold added 0.6 percent to $1,301.41 an ounce.
(Additional reporting by Karen Brettell and Saqib Iqbal Ahmed in New York, Ritvik Carvalho and Helen Reid in London and Asia markets team; Editing by Clive McKeef and James Dalgleish)