Wall St. and dollar gain, Greek yields shoot up

By Michael Connor

NEW YORK (Reuters) - Wall Street stocks rose to record highs on views the Federal Reserve will hold off on raising interest rates, although the dollar rebounded from four-month lows on Monday and Greek bond yields jumped on worries the country would not be able to make its debt payments.

Oil prices retreated, as supply worries triggered by advances by Islamic State militants in Iraq eased. U.S. Treasuries were weaker.

Gains in U.S. stocks took the Dow Jones and S&P 500 indices of top U.S. companies to new intraday highs.

"Right now with the way things are going, especially with the yield curve getting steeper, it's going to be less and less likely the Fed will raise rates in September," said John Burke, CEO of Burke Financial Strategies in New York.

"It looks to be at the very end of the year or maybe even early 2016."

The Dow Jones industrial average (.DJI) was last up 40.76 points, or 0.22 percent, at 18,313.32. The Standard & Poor's 500 Index (.SPX) was up 6.61 points, or 0.31 percent, at 2,129.34. The Nasdaq Composite Index (.IXIC) was up 28.97 points, or 0.57 percent, at 5,077.26.

Greek two-year sovereign bond yields rose about 300 basis points and topped 24 percent as investors fretted the country would be unable to make a debt repayment to the International Monetary Fund next month.

"Greece is running on fumes and the risk of non-payment of some form is riding high ... These are desperate times and desperate stakes," Rabobank fixed income strategist Richard McGuire said.

The country made a May 12 payment to the IMF only by emptying an IMF holding account, and a leaked IMF memo acknowledged Greece had little chance of making a scheduled June 5 payment. Many in the market say the next two weeks will be crucial for the country.

The dollar was last up more than 1 percent at $1.1303 against the euro, which had risen more than 8 percent against the U.S. currency since April 13. The dollar index (.DXY) was last ahead 1.16 percent.

A recent run of softer-than-expected U.S. economic data has encouraged bets that the Fed will hold off on its first interest rate hikes in nearly a decade, and that has interrupted several months of dollar gains against key world currencies.

Adding fuel to that, Chicago Fed President Charles Evans said Monday that while a rate hike could come as early as June, rates should start rising early in 2016. Evans is considered one of the Fed's most dovish members, generally in favor of looser policy.

U.S. Treasuries prices fell. Ten-year Treasury yields rose and last stood at 2.2196 percent, reflecting a price decline of 23/32.

German 10-year yields were steady at 0.65 percent.

Brent crude (LCOc1) was off 53 cents to $66.28 a barrel after Goldman Sachs analysts slashed their 2016-2020 price outlook due to expectations for persistently high supply.

That curbed worries about supply interruptions amid a major advance by Islamic State militants in Iraq and renewed air strikes by a Saudi-led coalition against Houthi militia in Yemen.

U.S. light sweet crude (CLc1) was last off 20 cents at $59.49 a barrel.

(Reporting by Michael Connor in New York; Editing by Dan Grebler)