US stocks fell, surrendering early gains, after a wave of disappointing economic data offset strong earnings from blue chips and the Federal Reserve's pledge to hold down interest rates.

The Dow Jones Industrial Average fell 22.33 points, or 0.2%, to 12,734.63, closing in the red for the third time in four sessions.

The Standard & Poor's 500-stock index fell 7.63 points, or 0.6%, to 1,318.43, while the Nasdaq Composite was off 13.03 points, or 0.5%, to 2,805.28. For the year, the Dow has climbed 4.3% this year, while the S&P 500 is up 4.8%. The Nasdaq has gained 7.7%.

The Dow climbed within reach of its highest intraday level since May 2008 but reversed course after sales of new homes unexpectedly fell 2.2% in December; economists had anticipated an increase of 1.9%. In addition, the Conference Board's reconfigured leading economic index rose 0.4% in December, below estimates of a 0.8% rise.

The weaker-than-expected data came after an earlier round of optimistic economic reports. Weekly jobless claims were in line with expectations, rising 21,000 to 377,000 in the week ended January 21. Meanwhile, December's orders for durable goods surged 3%, above estimates of a 2% gain.

Markets showed waning enthusiasm for the Fed's plan, unveiled Wednesday, to keep short-term interest rates near zero for almost three more years, as well as signals that the central bank could restart a bond-buying program to charge US economic growth.

The Dow's declines were cushioned by fourth-quarter earnings from Caterpillar, which surged 60% as the heavy-machinery maker pointed to higher sales volume and an increase in new-equipment sales. Shares climbed 2.1% and led blue chips higher.

Among other Dow components, 3M's fourth-quarter earnings rose a better-than-expected 2.8% as the consumer- and industrial-products maker saw strong growth in its industrial and transportation segment, but its display and graphics unit continued to post weaker sales. Shares rose 1.3%.

Meanwhile, AT&T swung to a fourth-quarter loss on several large charges, though revenue beat expectations. Shares fell 2.5% and were the Dow's worst performers.

Elsewhere, Netflix surged 22% after the online video and DVD-rental company reported solid subscriber rates even as earnings fell.

E*Trade Financial slid 15% after the online brokerage reported a net loss for the fourth quarter and revenue that fell short of expectations.

J.C. Penney shot up 19% after executives said the company will handle its more-than-$1 billion transformation without borrowing.

SanDisk's fourth-quarter profit fell 42% from a year ago on the back of a large tax-provision benefit, while core earnings registered a slight improvement. Shares slumped 11%

Monster Worldwide tumbled 20% after the job-search software maker reported disappointing quarterly results and offered a downbeat outlook.

For Australian ADRs listed on the NYSE, BHP Billiton rose by $0.28 (0.35%) to $80.42, ResMed fell by $0.18 (-0.66%) to $27.21, Telstra Corporation fell by $0.05 (-0.28%) to $17.74, Telecom Corporation of NZ fell by $0.05 (-0.58%) to $8.64, Westpac rose by $0.31 (0.27%) to $113.46.

Treasury prices rose, extending the prior day's move that pushed yields on some securities down by the most since November, in the wake of the Federal Reserve saying it would keep interest rates low for a much longer time. At 7:45AM (AEST) the 10 year Treasury Note was 1.93% and the five year note was 0.77%.

The dollar had extended losses after a pair of US reports showed jobless claims rose to 377,000 in the latest week and durable-goods orders jumped 3% last month - both higher than economists expected.

European stock markets climbed to five-month highs after the Federal Reserve said it would keep US interest rates low for at least two more years.

The Stoxx 600 index gained 1.1% to 257.96, snapping a two-day losing streak.

The DAX 30 index added 1.8% to 6,534.19 in Germany, while the French CAC 40 index rose 1.1% to 3,359.17 and the UK's FTSE 100 index rose 1.2% to 5,792.86.

Investors further looked for progress in negotiations between Greece and its private creditors, as the parties resumed talks on a prospective debt-swap deal.

The bond holders had previously made a maximum offer of a 4% coupon, but would return to negotiations with a new offer of 3.75%, according to news reports.

The Greek ASE Composite Index jumped 4.4% to 769.65, outperforming the rest of the European Indexes.

Italian debt was also in focus. The government sold EUR5 billion of two-year debt in a well-received auction and lowered borrowing costs.

Bank shares buoyed European stocks, with National Bank of Greece SA surging 18%, KBC Group NV and Erste Group Bank AG both up 9.5%, Raiffeisen Bank International AG up 9.1%, Credit Agricole SA adding 3.3% and Lloyds Banking Group PLC gaining 5.6%.

Gains for Italian banks lifted the Italian FTSE MIB index 1.9% to 16,145.24.

Unione di Banche Italiane SCpA jumped 5.5%, Banca Monte dei Paschi di Siena SpA advanced 7.9%, Banca Popolare di Milano Scarl gained 6.9% and Banco Popolare SC rose 4.8%.

Resources also supported the positive sentiment. Among miners, shares of Petropavlovsk PLC surged 12%, while Kazakhmys PLC rallied 7.8%, Rio Tinto PLC rose 4.8% and Fresnillo PLC added 3.1%.

On the FTSE 100, Rio Tinto rose by 181.5 pence (4.89%) to 3,893.00 pence and BHP-Billiton rose by 70.5 pence (3.31%) to 2,199.50 pence.

Hong Kong stocks jumped as investors returned from a long Lunar New Year-holiday to cheer the Federal Reserve's projection of ultra-low interest rates through late 2014.

The performance in other regional markets was less enthusiastic, however, with gains in South Korea tempered by weaker-than-expected economic growth data, while Japanese shares retreated from a near three-month high as investors locked in recent gains.

Hong Kong's Hang Seng Index ended 1.6% higher at 20,439.14, completing a five-session winning streak that began ahead of the holidays.

Local markets were likely to rise further, citing expectations for the European debt crisis to simmer down and for China to ease its monetary policy in the near future.

Elsewhere, South Korea's Kospi gained 0.3% to 1,957.18, while Japan's Nikkei Stock Average fell 0.4% to 8,849.47 after a mildly positive open. Singapore's Straits Times Index was flat.

Stock gains were spread broadly in Hong Kong, with shares of trading and logistics firm Li & Fung gaining 3.5% and Aluminum Corporation of China jumping 3.3%. Property and banking names also jumped, with Sino Land climbing 4.8% and China Life Insurance advancing 4.3%.

In Japan, shares of Tokyo Electric Power surged 5.5% following reports that a government-backed fund plans to inject Y1 trillion into the owner of the earthquake-and-tsunami-hit Fukushima nuclear power plant.

Shares of KDDI Corporation rose 1.1% ahead of the quarterly earnings release later in the day.

Many exporters lost ground after recent advances. Shares of Elpida Memory lost 2.7%, Sony Corporation gave up 1.4%, and Canon shed 0.7%.

The NZX-50 closed 0.1% higher at 3,281.68 as a quiet market exaggerated moves in some stocks.

Copper ended higher on the London Metal Exchange at its highest since September after news that the US Federal Reserve will maintain a low-interest rate environment boosted confidence in the metal's demand prospects. Crude oil, which had been up earlier on fresh worries about an oil supply cut by Iran, pared gains into the close. Gold prices climbed to levels last seen in early December, fueled by fears of inflation and of a weaker dollar after the Federal Reserve pledged to hold US interest rates near zero until the end of 2014.