* U.S. stocks finish more than 2% higher on the day
* U.S. 10-yr bond yields climb back from lowest since Sept 2017 (Updates with closing U.S. market levels)
By Caroline Valetkevitch
NEW YORK, June 4 (Reuters) - Global stock indexes rallied on Tuesday and U.S. stocks registered their biggest one-day gains in five months as Federal Reserve Chairman Jerome Powell seemed to open the door to the possibility of a rate cut, while yields on U.S. Treasuries rose.
Powell said the U.S. central bank will respond "as appropriate" to the risks posed by a global trade war and other recent developments.
His remarks followed St. Louis Fed President James Bullard's comments late on Monday that a rate cut "may be warranted soon."
"Investors are taking comfort in what appears to be a Fed that is contemplating cutting rates if the economy materially slows down," said Michael Geraghty, equity strategist at Cornerstone Capital Group in New York.
In a brief statement included as part of a speech on broader monetary policy issues, Powell said the Fed was "closely monitoring the implications" of ongoing trade disputes.
The United States' trade dispute with China and other countries has been escalating in recent weeks, increasing market uncertainty and driving down stocks in May.
A bounceback in U.S. internet-related stocks helped the equity rally following a sell-off in those names Monday that was tied to worries about a clampdown on the world's internet and social media giants.
The Dow Jones Industrial Average rose 512.4 points, or 2.06%, to 25,332.18, the S&P 500 gained 58.82 points, or 2.14%, to 2,803.27 and the Nasdaq Composite added 194.10 points, or 2.65%, to 7,527.12.
The last time the benchmark S&P index showed a bigger daily percentage gain was on Jan. 4, when Powell turned more dovish after a late 2018 sell-off, with a promise that the Fed would be patient and flexible in its interest rate path.
The pan-European STOXX 600 index rose 0.59% and MSCI's gauge of stocks across the globe gained 1.37%.
In U.S. Treasuries, yields rose, with longer-dated yields climbing from their lowest since September 2017.
"The bond market had had a pretty impressive run over the past two weeks, and as bonds started going lower, you started to see more money flowing into stocks," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
Market uncertainty had pushed investors into top-rated government bonds and other safety plays in recent weeks.
In late U.S. trading, benchmark 10-year Treasury yields rose 4.50 basis points to 2.126% after hitting 2.061% Monday.
Powell's comments helped to push the U.S. dollar modestly lower.
The dollar index fell 0.03%. The Japanese yen weakened 0.06% versus the greenback at 108.15 per dollar.
The global stock market rally boosted oil prices, while gold prices eased off of a three-month peak.
Brent futures gained 69 cents, or 1.1%, to settle at $61.97 a barrel. The global benchmark fell as low as $60.21 earlier in the session, its lowest since Jan. 29. U.S. crude rose 23 cents, or 0.4%, to $53.48.
Spot gold eased 0.1% to $1,324.01 per ounce, after touching its highest since Feb. 27 at $1,328.98 earlier in the session.
Additional reporting by Medha Singh, Amy Caren Daniel and Shreyashi Sanyal; and Richard Leong and Sinead Carew in New York; Editing by Dan Grebler, James Dalgleish and Tom Brown