GLOBAL MARKETS-Stocks ease, dollar rises; upbeat US data drives rates rethink

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S&P 500, Nasdaq lower in late US morning trading

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Dollar hits highest since late 2022

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Traders cut expectations for more Fed easing in 2025

(Updates to U.S. midday)

By Caroline Valetkevitch and Amanda Cooper

NEW YORK/LONDON Jan 13 (Reuters) - Global stock indexes fell on Monday, while the U.S. dollar index hit its highest in more than two years, after last week's blowout U.S. jobs data prompted investors to weigh the possibility that the Federal Reserve may have finished cutting interest rates.

U.S. Treasury 10-year yields surged to 14-month highs in choppy trading before pulling back.

Investors anxiously await Wednesday's U.S. Consumer Price Index reading. Any upside surprises could underscore the view that the Fed may be done with rate cuts for now. A Reuters poll of economists gives a median forecast for an annual rise of 2.9%, up from November's 2.7% and for a monthly increase of 0.3%. Also, U.S. producer prices data is due on Tuesday.

The December employment report on Friday showed 256,000 workers were added to nonfarm payrolls - well above expectations for a rise of 160,000 and the biggest increase since March.

Investors also worry whether inflation could pick up as a result of the policies on tariffs, migration and taxes of U.S. President-elect Donald Trump's incoming administration.

As of Monday, the U.S. rate futures market was pricing in just 27 basis points of easing this year, or one rate cut, most likely either in September or October, according to LSEG estimates.

"It'll be touch and go for the next couple of days until we get the inflation news out of the way," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

"The Fed has become more hawkish at this time," and investors are considering the possibility that the U.S. may have seen the end of rate cuts, he said.

The benchmark 10-year yield rose to 4.799%, the highest since November 2023 and was last up 1.4 basis points at 4.788% .

U.S. stocks mostly were lower, with the Nasdaq down more than 1% and the benchmark S&P 500 at a two-month low as bond yields surged. Technology led declines among sectors, while the Dow was higher.

The Dow Jones Industrial Average rose 193.01 points, or 0.46%, to 42,131.46, the S&P 500 fell 25.08 points, or 0.43%, to 5,801.96 and the Nasdaq Composite slid 210.37 points, or 1.10%, to 18,951.26.

The fourth-quarter U.S. earnings reporting season also gets under way this week with results expected from some of the biggest U.S. banks including JPMorgan Chase (JPM).

MSCI's gauge of stocks across the globe fell 5.14 points, or 0.62%, to 828.72. The STOXX 600 index fell 0.44%.

"We have a lot of uncertainty coming into play," including the potential policy changes under Trump, said Adam Sarhan, chief executive of 50 Park Investments in New York.

The dollar index, which measures the greenback against a basket of currencies, was up 0.23% at 109.91. It surged to its highest in more than two years on Monday, peaking at 110.17 , adding to the recent rally.

The euro was down 0.44% at $1.0199. Against the Japanese yen, the dollar weakened 0.08% to

157.56.

A surge in energy prices added to investor unease over sticky inflation, as Brent futures rose above $80 a barrel to their highest level in more than four months amid wider U.S. sanctions on Russian oil. U.S. natural gas futures hit two-year highs.

U.S. crude rose 2.42% to $78.42 a barrel and Brent rose to $81.04 per barrel, up 1.6% on the day.

With the dollar gaining, gold was down 0.7% at $2,670.86 per ounce. Gold generally struggles to compete for investor cash in a high-yield, high-dollar environment. (Reporting by Caroline Valetkevitch in New York and Amanda Cooper in London; Editing by Ed Osmond and Richard Chang)