By Lauren Almeida and Akane Otani 

U.S. stocks broke into positive territory late Thursday after a Federal Reserve official urged central banks to lower interest rates swiftly on signs of economic weakening.

The Dow Jones Industrial Average rose 3 points, or less than 0.1%, to 27223. The S&P 500 was up 0.3% at a session high and the Nasdaq Composite gained 0.2%.

Stocks drifted lower for much of the trading day, then got a lift after John Williams, president of the Federal Reserve Bank of New York, said "it pays to act quickly to lower rates at the first sign of economic distress."

The comments from Mr. Williams, who is vice chairman of the Fed's rate-setting Federal Open Market Committee, jolted markets, sending Treasury yields and the U.S. dollar to session lows.

The two have drifted lower this year while stocks have climbed as investors have bet that the Fed will make its first interest-rate cut since the end of the financial crisis at the conclusion of its July policy meeting.

To be sure, Mr. Williams didn't comment on the near-term outlook for U.S. monetary or economic policy. But his comments nonetheless sent market expectations for a half-percentage-point rate cut higher, with federal funds futures showing a 51% probability of such a cut in July -- the highest so far in 2019, according to CME Group.

Earlier, corporate earnings drove swings in an otherwise quiet trading day.

Netflix shed 10% after the video-streaming giant said late Wednesday that its number of subscribers in the U.S. declined for the first time in nearly a decade.

Equipment-rental company United Rentals lost 7.6% after narrowing its full-year revenue outlook.

Other stocks fared better, with eBay rising 0.9% after the online marketplace raised its profit outlook and notched better-than-expected quarterly results.

Energy shares fell, following oil prices lower.

Crude began the trading session slightly higher but declined later in the day as investors focused on a jump in fuel stockpiles that came out in a government report Wednesday. Data showed that gasoline inventories rose by 3.6 million barrels, setting off worries about weakening demand for the fuel.

"The counter-seasonal gasoline build is especially concerning," said analysts at Houston-based Tudor, Pickering, Holt & Co., which also noted that gasoline exports were muted versus last year.

Crude for August delivery fell 2.6% to $55.30 a barrel, logging its fourth straight session of declines. Oil prices were down even after Iran's Revolutionary Guard said that the country's forces seized a foreign tanker, a sign that continued geopolitical tensions in the Middle East could disrupt the flow of crude.

Elsewhere, the Stoxx Europe 600 fell 0.2%, weighed down by declines among shares of technology and oil-and-gas companies.

While the European economy is doing well, "it's more about downside risk coming from trade wars combined with the everlasting Brexit risk," said Jorge Garyao, global head of inflation strategy at Société Générale. The trade tensions that are currently focused on U.S.-China "could easily move into the eurozone," he said.

In Asia, the Shanghai Composite Index fell 1%, notching its third straight session of declines.

Progress toward a trade deal has stalled while the Trump administration determines how to address Beijing's demands that it eases restrictions on Huawei Technologies, people familiar with the talks told The Wall Street Journal. No face-to-face meetings have taken place or been scheduled since President Trump and President Xi Jinping of China met last month in Japan and agreed to resume talks.

Republican senators also are planning on introducing a bill that would restrict Huawei from buying and selling U.S. patents, according to draft text reviewed by The Wall Street Journal.

"Markets don't seem to be taking the comments on trade tensions very well," said Fritz Louw, a currency analyst for Mitsubishi UFJ Financial Group. He added that investors are likely to see several days of volatility as they await progress in talks between China and the U.S.

Japan's Nikkei Stock Average fell 2%, posting its biggest one-day decline since March, after data showed exports tumbled for the seventh straight month in June because of a sharp drop in shipments of chip-making tools and automobile parts to China.

--Dan Molinski, Anna Isaac and Caitlin Ostroff contributed to this article.

Write to Lauren Almeida at lauren.almeida@wsj.com and Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

July 18, 2019 15:17 ET (19:17 GMT)