* World stocks fall but U.S. indexes end with gains
* Global service sector growth slows
* Oil prices down on stockpile buildup, economy (Updates to U.S. market close)
By Rodrigo Campos
NEW YORK, Aug 3 (Reuters) - Global stocks hit a five-month low while gold prices posted a new high on Wednesday as investors fretted about government spending cuts at a time of slowing global economic growth.
But investors saw value in the S&P 500 <.SPX> after it hit its lowest level since December, and the benchmark U.S. index finished higher to cap a seven-day losing streak.
Data showed the U.S. service sector growth slowed in July, just days after manufacturing data pointed to a slowing expansion. For details see [ID:nN1E77208M]
Investors sought the safety of long-term U.S. bonds and gold, while a move to curb the Swiss franc's recent strength was seen working only temporarily. Fears about the U.S. and global economies have pushed benchmark Treasury yields to levels not seen since early November.
Wednesday's weak service sector data from Asia, Europe and the United States followed evidence of slowing growth in manufacturing in many countries on Monday. [ID:nL6E7J30NB]
"It's not just (the U.S.), it's the whole world. I'm having trouble now remembering the last good data point," said Uri Landesman, president of Platinum Partners in New York.
Investors worry that fiscal cutbacks in Europe and the United States at a time of stagnating global output endanger an already flagging global recovery.
Gold hit a record for a second straight day, driven by deepening fears over the spread of the European debt crisis and its impact on regional growth, while data showed a number of central banks bought the precious metal in June.
Spot gold
The U.S. 30-year bond
While the flight to safety caused U.S. bonds to rise, markets gave little respite to Italian bonds as the escalating debt crisis pushed the region's largest government bond market toward a tipping point. [GVD/EUR]
The Italian 10-year benchmark bond price edged up but yields were still above 6 percent.
At the close of trading in New York, the Dow Jones industrial average <.DJI> gained 29.82 points, or 0.25 percent, to 11,896.44. The S&P 500 <.SPX> gained 6.29 points, or 0.50 percent, to 1,260.34. The Nasdaq Composite <.IXIC> gained 23.83 points, or 0.89 percent, to 2,693.07.
Composite volume, above 10.5 billion shares, was the highest since March.
Equities erased most of their losses after two former top officials at the Federal Reserve conditionally endorsed a further round of bond buying by the U.S. central bank to spur a flagging economic recovery, according to the Wall Street Journal. [ID:nN1E7721BY].
The previous round, known as QE2, was seen as a main driver of a spike in equity and commodity prices in late 2010 and the first half of this year.
MSCI's world equity index <.MIWD00000PUS> fell 0.7 percent
to its weakest since mid March, down for a sixth straight
session. European stocks <.FTEU3> fell 2 percent to their
lowest closing level in almost a year and U.S.
dollar-denominated Nikkei futures
Energy and industrial metals prices fell as the economic
view darkened. Brent
Data showing a build-up in U.S. oil stockpiles pressured crude oil prices further.
In foreign exchange markets, the Swiss franc retreated from record highs after the Swiss National Bank unexpectedly cut interest rates to counter its rise. Declines are seen temporary, though, as global growth concerns drive investors toward the perceived safety of the Swiss currency.
"I am skeptical that the SNB actions will have more than a transitory 'psychological' negative impact on the Swissie if we remain in a risk-averse world," said Alan Ruskin, global head of G10 currency strategy at Deutsche Bank in New York.
"With the U.S. dollar not playing its traditional role as flight-to-quality vehicle, the flight from a wide array of risky assets is being funneled and concentrated into very few alternatives," he said.
The euro hit a record low of 1.0793 francs on trading platform EBS just before the SNB's move. It last traded at 1.11022 francs
The SNB said the franc was "massively overvalued," keeping alive the prospect of intervention. [ID:nL6E7J30C0]
That also sharpened the focus on Japanese authorities who warned again they were uncomfortable with the rising yen. [ID:nL3E7J24NW] (Additional reporting by Chuck Mikolajczak, Emily Flitter, Wanfeng Zhou and Caroline Valetkevitch; Editing by Dan Grebler)