GLOBAL MARKETS-Stocks dip as euphoria fades, long bond rallies

* Wall Street pulls back from Monday's euphoric gains

* World stocks hit 5-week high before easing

* Fed details Treasury bond buying plan, 30-yr bond gains

* Dollar rises on hopes U.S. economy will revive

(Updates prices, adds detail, changes byline)

By Steven C. Johnson

NEW YORK, March 24 (Reuters) - Wall Street stocks fell on Tuesday as enthusiasm about plans to purge the U.S. financial sector of bad assets faded, while long-dated U.S. government debt rallied after the Federal Reserve detailed plans to buy Treasuries.

Second thoughts about the U.S. Treasury's plan to persuade private firms to help rid banks of up to $1 trillion in toxic assets increased safe-haven flows into the dollar, as did talk that euro zone interest rates may have further to fall.

Strength in the dollar put oil and gold on the defensive, while Wall Street's retreat pulled world stocks off five-week highs amid concern about whether and when any bank rescue plan would translate into improved health in the financial sector.

On Monday, when details of the bank rescue plan were unveiled, U.S. stocks surged about 7 percent, helping lift the benchmark S&P 500 index more than 20 percent from a bear market closing low set on March 9. The index remains off nearly 10 percent for the year, however.

"Most traders' expectations coming into today were that yesterday's upside move, while justified, was a little over extended," said Michael James, senior trader at investment bank Wedbush Morgan in Los Angeles.

But he said the market gave up only a fraction of the prior day's gains, making the price action "very encouraging."

The Dow Jones industrial average <.DJI> was down 115.57 points, or 1.49 percent, at 7,660.29. The Standard & Poor's 500 Index <.SPX> was down 16.76 points, or 2.04 percent, at 806.16. The Nasdaq Composite Index <.IXIC> was down 38.97 points, or 2.50 percent, at 1,516.80.

Globally, the MSCI World index of stocks <.MIWD00000PUS> eased slightly on the day but only after rising to its highest level in more than a month.

In Tokyo, Japan's Nikkei average <.N225> hit a 2-1/2-month closing high on Tuesday in the spillover of the U.S. plan to deal with bad assets plaguing the financial sector, while European <.FTEU3> shares closed slightly higher.

FED DETAILS BOND-BUYING

On the government bond market, long-dated Treasury prices got a boost when the Fed said it will kick off its Treasury purchases on Wednesday and target seven- to 10-year notes.

Long-dated Treasuries rallied, with the 30-year bond rising 21/32, for a yield of 3.6535 percent.

The benchmark 10-year U.S. note was down 14/32, with the yield at 2.7046 percent. The 2-year U.S. Treasury note was down 2/32, with the yield at 0.924 percent.

The Fed surprised markets last week when it said it will buy up to $300 billion of Treasuries over the next six months.

"It was a big deal because it is happening so fast," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts, adding "it tells you that (the Fed) is serious -- they are operating on all cylinders, which is a positive."

On the currency market, dollar gains were helped by pressure on the euro after policymakers suggested interest rates in the euro area could fall further. That coincided with data showing another sharp contraction in manufacturing and service sector activity.

European Central Bank governing council member Erkki Liikanen said the central bank has not used up all its "room for maneuver" on interest rates [ID:nLO85011].

This followed comments overnight from ECB President Jean-Claude Trichet, who again said interest rates could be cut to help kick-start the economy. [nN23541321].

The news out of Europe contrasted with glimmers of hope in the United States, where data showed a 1.7 percent rise in home prices from January from December. This came a day after data showed sales of previously owned U.S. homes rose at their fastest pace in nearly six years in February.

Some took it as a sign that the U.S. housing sector, whose spectacular tumble caused the global financial turmoil, might be pulling out of its tailspin.

The euro was down 1.3 percent at $1.3459 from a previous session close of $1.3629. Against the Japanese yen, the dollar was up 0.9 percent at 97.72 from a previous session close of 97.02.

"The bloom has come off the euro, in particular, and its gains had been overextended anyway," said Ken Landon, a currency strategist at JPMorgan Chase in New York.

In energy and commodities prices, U.S. light sweet crude fell 25 cents, or 0.46 percent, to $53.55 per barrel, and spot gold prices fell $12.20, or 1.30 percent, to $924.95.

The Reuters/Jefferies CRB Index <.CRB> was down 0.74 points, or 0.32 percent, at 228.80.

(Additional Reporting by Reuters bureaus worldwide, Editing by Chizu Nomiyama)