US equities rebounded as Reynolds American soared the most ever after British American Tobacco offered to pay $US47 billion ($62 billion) for full control of the cigarette maker. Time Warner jumped to a 15-month high on speculation it may agree to a takeover by AT&T Inc. That blunted declines spurred by the surging dollar and disappointing outlooks from General Electric and Advanced Micro Devices. AT&T sank 3 per cent to a seven-month low.

The S&P 500 Index fell less than a point to 2,141.16 at 4 pm in New York, all but wiping out an early 0.5 per cent drop. The benchmark capped its first weekly advance in three, increasing 0.4 per cent. The Dow Jones Industrial Average lost 16.64 points, or 0.1 per cent, to 18,145.71. The Nasdaq Composite Index rose 0.3 per cent, buoyed by Microsoft and PayPal, which jumped 10 per cent.

The US dollar gained versus most peers and for a fourth consecutive day against the euro as traders bet on a Fed interest-rate increase by December. European Central Bank President Mario Draghi signalled that quantitative easing won't come to an "abrupt" end, leaving traders waiting until at least December for news about policy changes. Oil fluctuated as investors weighed the likelihood of a deal to reduce supply after Russia's Energy Minister said the country's output could rise to a record next year.

Investors are parsing earnings reports and outlooks from companies to gauge the health of the corporate sector amid uneven global growth. Traders are pricing in less than one-in-five odds of a hike at the Federal Reserve's next meeting, which takes place days before the presidential election, and about a 69 per cent chance of action in December.

'Earnings all over the place'

"Earnings this season have been all over the place, a mixed-to-OK season with banks better than expected," said Otto Waser, chief investment officer of R&A Group Research & Asset Management in Zurich. "People are generally more cautious when rates rise. Underlying earnings growth is close to zero, so why should the market move higher with interest rates going higher?"

MSCI's gauge of global equities dropped 0.3 per cent at 11 am in New York, trimming its weekly advance to 0.4 per cent. The Stoxx Europe 600 index was little changed.

Among stocks moving on corporate news:

• Microsoft jumped to a record as first-quarter sales and earnings topped estimates, thanks to its growing cloud computing business
• GE slipped 0.3 per cent, after falling as much as 2.6 per cent. The company cut its 2016 forecast for organic sales growth.
• Advanced Micro Devices fell 6.3 per cent after predicting fourth-quarter revenue that will miss analysts' estimates, hurt by dwindling orders for game console processors.
• PayPal climbed to an all-time high after saying it will make more money in coming years than previously expected, easing concern recent deals with credit card companies would hurt earnings.
• McDonald's marked its strongest gain in a year as quarterly revenue topped estimates, helped by international markets including Australia, the UK
• Daimler fell after reducing its revenue forecast
• Ericsson slid after posting a loss.

Greenback gains 

Bloomberg's Dollar Spot index, which tracks the currency against 10 major peers, rose 0.4 per cent. It was set for the biggest back-to-back gain since September 9.

The euro fell to the lowest since March after Mario Draghi said quantitative easing is unlikely to come to an "abrupt" end, making traders more confident that the monetary stimulus will continue beyond its planned expiry date. The single currency dropped 0.5 per cent to $US1.0880, the lowest since March 10 -- when the ECB cut its main interest rates to record lows.

"Anybody who had positioned for the risk that Draghi would signal a hard taper took their chips off that particular table," said Ned Rumpeltin, the head of European currency strategy at Toronto Dominion Bank in London. "This also put emphasis back on the dollar. And the calendar over the next few weeks look dollar friendly."

Elsewhere in the world, China's yuan fell to a six-year low as policy makers signalled tolerance for further weakness amid a surge in the dollar and a tumble in exports. The yen erased losses after an earthquake with a magnitude of 6.6 hit Tottori prefecture in western Japan. 

Oil ebbs and flows

Oil fluctuated after Russia's Energy Minister Alexander Novak said production could be adjusted depending on talks with OPEC. President Vladimir Putin previously pledged his support to efforts by OPEC to limit output. The US dollar strengthened, weighing on commodity prices.

A stronger US dollar is "a big limiting factor for crude oil prices," said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. "Until we see a real sort of turnaround in the supply balance sheet one way or the other, we'll probably chop around some more."

West Texas Intermediate for December delivery rose 0.1 per cent to $US50.67 a barrel on the New York Mercantile Exchange. Brent for December settlement added 0.5 per cent to $US51.65 a barrel on the London-based ICE Futures Europe exchange.

The yield on benchmark US Treasuries due in a decade fell one basis point, or 0.01 percentage point, to 1.74 per cent. It touched a four-month high of 1.81 per  cent this week as higher oil prices spurred speculation inflation will gather pace. That may boost the case for the Fed to raise rates.

Bloomberg