U.S. stocks end mixed following Fed; dollar falls

NEW YORK (Reuters) - Wall Street stocks ended a volatile session near flat and the dollar surrendered gains on Wednesday after the U.S. Federal Reserve offered no indication that a reduction in the pace of its stimulus program is imminent.

The Fed said it will continue to buy $85 billion in mortgage and Treasury securities per month in its ongoing effort to bolster an economy still challenged by federal budget-tightening and weak growth overseas.

Stocks were up before the release of the Fed's policy statement, bolstered by data that showed the U.S. economy grew more quickly than expected in the second quarter.

U.S. economic growth, as measured by gross domestic product, accelerated in the second quarter by a 1.7 percent annual rate, the government said. Economists had expected a 1.0 percent gain.

The dollar had risen on the data, which drove expectations that the Fed would start to scale back its assets purchases this year. But the Fed announcement trimmed most of those gains, though the U.S. currency remained higher against the yen.

"The Fed continues to try to talk down the concerns of kind of a premature taper. In fact, there were even tones in this piece that were a little disinflationary," said Burt White, chief investment officer at LPL Financial in Boston.

The Dow Jones industrial average was down 21.05 points, or 0.14 percent, at 15,499.54 at the unofficial close, weighed by American Express. The Standard & Poor's 500 Index was down 0.23 point, or 0.01 percent, at 1,685.73. The Nasdaq Composite Index was up 9.90 points, or 0.27 percent, at 3,626.37.

The Fed's stimulus is seen by many as central to the S&P 500's gain of nearly 19 percent so far this year. It was the 10th straight session in which the S&P 500 traded within 10 points of the 1,700 level, considered key resistance for the U.S. market. The Nasdaq touched a near 13-year high at the session peak.

On Thursday, attention will switch to the European Central Bank and Bank of England policy meetings and data on global manufacturing, followed by the U.S. monthly employment report on Friday.

Signs the developed world's central banks will keep monetary policy loose for a long time to support a tentative economic recovery have put many equity and commodities markets on course for their best month of the year in July.

But strategists have also cautioned that the gains, which pushed the MSCI World Equity index to its best monthly rise, a gain of 4.8 percent, since January 2012, have increased the risk that investors could find reasons over the next few days to cash out.

"At the least what we expect is a lot more volatility and we think the volatility comes with a bit more downside risk than upside potential," said Wouter Sturkenboom, investment strategist at Russell Investments in London.

EUROPEAN STOCKS RISE

In Europe, stock market gains were underpinned by data showing the number of people out of a job in the euro zone fell for the first time in more than two years in June.

Europe's broad FTSEurofirst 300 index closed up 0.2 percent for its best month since June 2012.

The dollar fell 0.2 percent against the yen while the euro gained 0.3 percent against the dollar. The dollar index fell 0.2 percent. Much of the dollar's strength in recent months was on the expectation that the Fed was closer to paring back stimulus than not.

"Today's FOMC statement maintains the Fed's maximum flexibility on quantitative easing," said Joseph Trevisani, chief market strategist at WorldWideMarkets, in Woodcliff Lake, New Jersey. "The end of the program was never going to be a cut and dried announcement in the official policy statement but in the various pronouncements of Chairman Bernanke."

Prices for U.S. Treasuries reversed early losses to trade higher after the Federal Reserve statement. The benchmark 10-year note rose 7/32 in price to yield 2.58 percent after the statement.

German Bund futures hit session lows after the U.S. data, falling as low 141.82, but were last up 0.3 percent at 142.91 after the Fed statement.

GOLD

Gold fell 0.4 percent. But it is still up 7.2 percent for the month, snapping a three-month losing run and marking its biggest monthly rise since January 2012, though it is down 21 percent since the beginning of 2013.

U.S. crude rose 2 percent to $105.16 a barrel, extending gains after the Fed statement. It had risen earlier on news that oil stocks at Cushing, Oklahoma, the delivery point for U.S. crude futures, are at their lowest since April 2012, according to data from the U.S. Energy Information Administration.

(Reporting by Nick Olivari; editing by James Dalgleish, Dan Grebler and Leslie Adler)

Source: http://news.yahoo.com/asian-shares-dollar-steady-ahead-fed-outcome-010901686.html

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