GLOBAL MARKETS-Wall Street rebounds, Treasury yields rise as markets digest Fed's slowdown signal

*

US stocks recover from steepest selloff in months

*

3Q US GDP revised up to 3.1% from 2.8%

*

European, Asian stocks lower after Fed meeting

*

Dollar gives back some gains; gold rebounds

*

Treasury yield curve steepest in over two years

(Updates to US afternoon trade)

By Stephen Culp

NEW YORK, Dec 19 (Reuters) - Wall Street rebounded on Thursday and benchmark U.S. Treasury yields hit their highest level since May as stocks recovered in the wake of the Federal Reserve's hawkish outlook.

Crude prices dipped and gold rallied as investors grew accustomed to the reality that the central bank will take a slower, more measured approach to policy easing in the coming year.

The cautious note struck by the Fed's economic projections and the expected slowdown of rate cuts prompted the steepest U.S. stock selloff in months on Wednesday.

"Those larger moves indicate that some investors are worried that (Fed Chair Jerome) Powell's comments suggest maybe the Fed is considering not cutting rates any more," said Bill Merz, head of capital market research at U.S. Bank Wealth Management in Minneapolis.

"You saw the market reacting to specific words that Jerome Powell delivered during the press conference, which emphasizes the point that there's a lot of speculation that occurs in real time, with investors trying to decipher what the Fed really means," Merz added.

Other central banks wrapped up an eventful year of rate decisions, with the central banks of England, Japan, Norway and Australia holding firm, and Switzerland and Canada implementing cuts of 50 basis points. Sweden's Riksbank reduced its policy rate by 25 bps, as did the European Central Bank last week.

On the economic front, an unexpected upward revision to third-quarter U.S. GDP, a dip in jobless claims and an upside surprise in existing home sales all underscored U.S. economic strength.

"Generally speaking, what happened at the Fed was good news," said Thomas Martin, senior portfolio manager at GLOBALT in Atlanta. "They're on the job on inflation, the economy is strong, the final GDP number of 3.1% ain't bad."

The Dow Jones Industrial Average rose 189.30 points, or 0.47%, to 42,527.15, the S&P 500 rose 18.60 points, or 0.34%, to 5,892.41 and the Nasdaq Composite rose 55.47 points, or 0.31%, to 19,453.77.

European stocks took a dive, setting a course for their biggest percentage drop in five weeks as the Fed's hawkish signal sent investors fleeing riskier assets.

MSCI's gauge of stocks across the globe fell 3.70 points, or 0.44%, to 841.74.

The STOXX 600 index fell 1.51%, while Europe's broad FTSEurofirst 300 index fell 30.90 points, or 1.51%.

Emerging market stocks fell 12.45 points, or 1.14%, to 1,082.86. MSCI's broadest index of Asia-Pacific shares outside Japan closed lower by 1.41%, to 572.84, while Japan's Nikkei fell 268.13 points, or 0.69%, to 38,813.58.

Yields on 10-year Treasuries jumped past 4.5% to the highest level since May and the yield curve steepened to its widest gap in more than two years in the face of the U.S. central bank's more measured approach to interest-rate cuts in the coming year.

The yield on benchmark U.S. 10-year notes rose 5.8 basis points to 4.556%, from 4.498% late on Wednesday.

The 30-year bond yield rose 6.9 basis points to 4.7294% from 4.66% late on Wednesday.

The two-year note yield, which typically moves in step with interest-rate expectations for the Federal Reserve, fell 4.7 basis points to 4.308%, from 4.355% late on Wednesday.

The dollar reversed an earlier pullback and was last nominally higher against a basket of world currencies stalled as the market digested the Fed's cooler approach to easing.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.11% to 108.38, with the euro up 0.12% at $1.0364.

Against the Japanese yen, the dollar strengthened 1.69% to 157.41.

Bitcoin extended its selloff in the aftermath of Wednesday's Fed decision.

In cryptocurrencies, bitcoin fell 4.43% to $96,569.00. Ethereum declined 7.86% to $3,401.20.

Oil lost ground as central bankers in the U.S., Europe and Asia sounded notes of caution over easing monetary policy, raising worries over dampening global demand.

U.S. crude fell 0.95% to $69.91 per barrel, while Brent settled at $72.88 per barrel, down 0.69% on the day.

Gold advanced but pared earlier gains after U.S. economic data reinforced expectations that the Fed will take a cautious approach to monetary policy in the coming year.

Spot gold rose 0.44% to $2,599.07 an ounce. U.S. gold futures fell 1.69% to $2,592.00 an ounce.

(Reporting by Stephen Culp in New York Additional reporting by Ankur Banerjee in Singapore and Alun John in London Editing by Matthew Lewis and Rod Nickel)