Updates to 2:50 p.m. ET

By Isla Binnie and Caroline Valetkevitch

NEW YORK, July 19 (Reuters) -World stock indexes fell on Friday as a global cyber outage rattled investors, while the dollar climbed and was on track to snap a two-week streak of declines.

The outage hit services from airlines to banks, unsettling markets further after a turbulent week.

Cybersecurity firm CrowdStrike CRWD.O was last down 12.1% after an update to one of its products appeared to trigger the outage that affected customers using Microsoft's MSFT.O Windows Operating System, disrupting businesses across sectors. Microsoft was down just 1%.

The Cboe Volatility index .VIX - Wall Street's "fear gauge" - rose to its highest level since April 25.

"Today's outages remind us that services can have supply chain disruptions too," said Jeff Kleintop, chief global investment strategist at Charles Schwab. "While not a cyberattack, the outage is a worrisome reminder of how our systems are deeply integrated."

The Dow Jones Industrial Average .DJI fell 387.81 points, or 0.95%, to 40,277.21, the S&P 500 .SPX lost 38.88 points, or 0.70%, to 5,505.71 and the Nasdaq Composite .IXIC lost 145.15 points, or 0.81%, to 17,726.07.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 6.93 points, or 0.85%, to 810.52. The STOXX 600 .STOXX index ended down 0.77%.

Investors also braced for important results in the U.S. second-quarter earnings season in the upcoming weeks. Results from megacaps will be in focus, with the S&P 500 technology-related sector down about 5% this week as investors rotated into sectors that have languished so far in 2024.

Tesla TSLA.O and Google-parent Alphabet GOOGL.O both report on Tuesday, kicking off results from the "Magnificent Seven" megacap group of stocks that have propelled markets since early 2023. Microsoft and Apple AAPL.O are set to report the following week.

DOLLAR RECOVERS

Thedollar index was on track for its second straight daily advance, putting the greenback on pace for its first weekly gain in three. It bounced back on recent U.S. economic data and concerns about the technology outage.

Against the Japanese yen JPY=, the dollar strengthened 0.07% to 157.48.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, gained 0.25% to 104.40, with the euro EUR= down 0.18% at $1.0876.

The European Central Bank kept interest rates on hold as expected, but left the door open to a September cut.Two ECB policymakerson Friday expressedgreater confidence that inflation was heading to the central bank's goal next year.

The Federal Reserve is scheduled for its next policy announcement at the end of July.

Markets expect only a slight chance for a cut of at least 25 basis points (bps), while almost completely pricing in a cut at its September meeting, according to CME's FedWatch Tool.

U.S. Treasury yields rose as investors waited on fresh data next week.

The yield on benchmark U.S. 10-year notes US10YT=RR rose 5.1 basis points to 4.239%, from 4.188% late on Thursday.

Oil prices fell as investors reacted to renewed hopes of a possible ceasefire in Gaza. U.S. crude CLc1 lost $2.69 to settle at $80.13 a barrel, whileBrent LCOc1 fell to $2.48 to $82.63.

In cryptocurrencies, bitcoin BTC= gained 4.50% at $66,692.00.

Reporting by Isla Binnie and Caroline Valetkevitch in New York
Additional reporting by Rae Wee in Singapore and Marc Jones, Amanda Cooper and Dhara Ranasinghe in London
Editing by Andrew Cawthorne, Arun Koyyur, Matthew Lewis and Aurora Ellis

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