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By Chuck Mikolajczak

NEW YORK (Reuters) -A gauge of global stocks hit an intraday record on Thursday while U.S. Treasury yields tumbled as an inflation reading fueled hopes the Federal Reserve's preferred measure of prices might be cooler than anticipated.

The Labor Department said the producer price index (PPI) for final demand rose 0.4% last month after an upwardly revised 0.5% gain in December, topping the estimate of economists polled by Reuters for a 0.3% rise.

The data comes on the heels of Wednesday's consumer price index (CPI), which showed its largest acceleration in nearly 1-1/2 years.

But components of the PPI data that are part of the personal consumption expenditures (PCE), which Fed Chair Jerome Powell said on Wednesday is the Fed's preferred targeted inflation measure, were soft and added to hopes the PCE reading may be cooler than currently expected.

"Equity investors are taking cues from the bond market," said Jack Ablin, chief investment officer at Cresset Capital.

"Investors were also preparing for kind of an alarmingly high inflation number, based on tariffs."

On Wall Street, U.S. stocks rallied to close higher, as investors also assessed U.S. President Donald Trump's tariff plan.

Trump said he has directed his economics team with devising a plan to impose reciprocal tariffs on every country that imposes duties on U.S. imports in a fresh volley at American friends and foes, ramping up prospects for a global trade war.

The Dow Jones Industrial Average rose 342.87 points, or 0.77%, to 44,711.43, the S&P 500 rose 63.10 points, or 1.04%, to 6,115.07 and the Nasdaq Composite rose 295.69 points, or 1.50%, to 19,945.64.

MSCI's gauge of stocks across the globe rose 9.59 points, or 1.10%, to 882.37 after hitting an intraday record of 883.30, and was on track for its biggest daily percentage gain since January 15.

The pan-European STOXX 600 index rose 1.09% for a fourth straight session to close at a record, buoyed by gains in Nestle (NSE: NEST ) and Siemens (ETR: SIEGn ) after their quarterly results, as well as hopes for talks to end the war between Russia and Ukraine.

The yield on benchmark U.S. 10-year notes tumbled 9.9 basis points to 4.535%, on track for its biggest daily drop in a month. Aside from the PPI data, U.S. initial jobless claims fell 7,000 to a seasonally adjusted 213,000, slightly below the 215,000 level and indicating the job market remains on stable footing.

Still, expectations for a rate cut from the Fed continue to be pushed back this year, with the market not pricing in a chance of more than 50% for a cut of at least 25 basis points until July, according to CME's FedWatch Tool. Earlier in the session, markets did not see more than a 50% chance for a cut until the September meeting.

The dollar index , which measures the greenback against a basket of currencies, fell 0.76% to 107.09 and was on track for its biggest one-day percentage drop since January 20, with the euro up 0.75% at $1.046.

Croatian policymaker Boris Vujcic said the European Central Bank could cut interest rates three more times this year even if its U.S. counterpart moves more slowly, but policy easing would be predicated on a rapid fall in underlying inflation.

Against the Japanese yen, the dollar weakened 1.06% to 152.78.

Sterling strengthened 0.92% to $1.2556. Britain's economy unexpectedly grew by 0.1% in the final quarter of last year, official figures showed, topping the estimate envisaging a contraction of 0.1%, though longer-term challenges remain.

Oil prices were slightly lower, rebounding from earlier declines as downward pressure from hopes for peace talks between Russia and Ukraine were offset by optimism for a pause in new U.S. tariffs. U.S. crude settled down 0.11% to $71.29 a barrel and Brent fell to settle at $75.02 per barrel, down 0.21% on the day.