* Weak U.S. economic data weighs on Wall Street
* U.S., China working on six memoranda of understanding
* Trade, Brexit hopes spur selling of U.S., German bonds
* Aussie dollar reels from China's Dalian port ban on coal import
* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh (Updates to late U.S. market action, adds quote)
By Richard Leong
NEW YORK, Feb 21 (Reuters) - Wall Street stocks fell on Thursday due to a deteriorating economic outlook that was only partially offset by signs of trade progress between China and the United States, while gold and oil prices retreated from their recent peaks.
The dollar held steady against most major currencies, while the Australian dollar tumbled on jitters about a ban on that country's coal by a key Chinese port.
Signs of positive developments in U.S.-Sino trade talks and a possible Brexit compromise between Britain and the European Union spurred selling of U.S. and core European government debt, pushing their yields higher.
The U.S. Commerce Department said on Thursday domestic orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.7 percent.
Moreover, the U.S. Mid-Atlantic factory sector fell into contraction territory in February for the first time since May 2016, data from the Philadelphia Federal Reserve showed.
"Mainly it's about the bad economic reports and intensifying recession fears," said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.
The grim economic data was offset by signs of progress in trade talks between Beijing and Washington.
The world's two biggest economies have started to outline commitments in principle on the most contentious issues in their trade dispute, marking the most significant progress yet toward ending a seven-month trade war, according to sources familiar with the negotiations.
The Dow Jones Industrial Average fell 103.81 points, or 0.4 percent, to 25,850.63, the S&P 500 lost 10.42 points, or 0.37 percent, to 2,774.28 and the Nasdaq Composite dropped 30.01 points, or 0.4 percent, to 7,459.06.
The pan-European STOXX 600 index lost 0.28 percent and MSCI's gauge of stocks across the globe gained 0.47 percent.
The benchmark 10-year Treasury yield was up over 3 basis points at 2.686 percent, while the German 10-year Bund yield rose 3 basis points to 0.13 percent.
Safe-haven demand for bonds cooled a bit as diplomats said Britain and the EU were moving closer to a legal compromise that Prime Minister Theresa May hopes will gain approval from the British parliament.
In the currency market, an index that tracks the dollar against a basket of currencies rose nearly 0.2 percent, while the Aussie dollar was down 1 percent at $0.7092.
China's northern Dalian port has put an indefinite ban on coal imports from Australia since the start of February, a port official told Reuters on Thursday.
In the commodity market, crude prices pulled back from their highest levels of 2019 on hopes that oil supplies will balance later this year.
U.S. crude settled down 20 cents or 0.35 percent at $56.96 a barrel after hitting a 2019 high of $57.55 the previous day. Brent futures ended down 1 cent at $67.07, below a 2019 peak of $67.38.
Spot gold prices were down 1.17 percent at $1,322.81 having scaled a 10-month peak of $1,346.70 on Wednesday. (Additional reporting by Kate Duguid, Gertrude Chavez-Dreyfuss in New York; Shreyashi Sanyal, K. Sathya Narayana in Bengaluru and Marc Jones in London; Daniel Leussink in Tokyo; Editing by Alison Williams and Dan Grebler)