* Yields ease back
* U.S. stocks little changed after Thursday rally
* Oil slips as inventories seen building (Updates with U.S. market opening levels, changes dateline, previous LONDON)
By Caroline Valetkevitch
NEW YORK, May 15 (Reuters) - Treasury yields fell and the dollar index slipped on Friday following a stabilization in European government bonds and another batch of weak U.S. economic data that raised expectations the Federal Reserve will need to wait longer to raise interest rates.
U.S. stocks were little changed after a rally Thursday that pushed the S&P 500 to a record high close.
Data showed U.S. industrial production fell for a fifth straight month in April in part as oil and gas drilling declined further.
Also underscoring a lackluster economic picture for the United States was data showing a sharp drop in consumer confidence in early May and a mild rebound in factory activity in New York state.
The reports follow weak retail sales and producer inflation data this week, suggesting the Federal Reserve will probably not raise interest rates anytime soon.
The dollar index, a measure of the greenback against a group of currencies including the euro and yen, was down 0.1 percent and on track to fall for a fifth straight week, the longest such stretch in four years.
“The dollar is oversold. The data weren’t all that great, but the story is people still see the Federal Reserve raising interest rates later this year,” said Kathy Lien, managing director at BK Asset Management in New York.
European government bonds stabilized on Friday, helping U.S. bond market sentiment.
Treasury yields have jumped in the past three weeks in line with a dramatic sell-off in German government debt, and some investors are now taking advantage of the higher yields.
Benchmark 10-year notes were last up in 18/32 price to yield 2.17 percent, down from 2.24 percent late on Thursday.
The MSCI World equity index was up 0.1 percent, heading for a weekly gain of 0.5 percent and not far from last month’s record high.
The Dow Jones industrial average fell 6.98 points, or 0.04 percent, to 18,245.26, the S&P 500 lost 0.48 points, or 0.02 percent, to 2,120.62 and the Nasdaq Composite dropped 2.89 points, or 0.06 percent, to 5,047.90.
In commodities, oil futures were lower after reports that growing supply was boosting inventories. Copper and other industrial metals fell as investors concluded a recent rally had overshot supply-demand fundamentals.
Brent was down 22 cents at $66.48 while U.S. crude oil was down 52 cents at $59.36 a barrel. (Additional reporting by Karen Brettell and Richard Leong in New York and Lionel Laurent in London; Editing by Larry King and Meredith Mazzilli)