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US STOCKS-Dow pares loss, S&P ticks up as Fed seen easing soon

Published 10/12/2010, 02:49 PM
Updated 10/12/2010, 02:52 PM

* Fed discussed further money printing "before long"

* Dow off 0.1 pct, but S&P up 0.1 pct, Nasdaq up 0.3 pct (Updates with Fed minutes, changes byline)

By Rodrigo Campos

NEW YORK, Oct 12 (Reuters) - The Dow trimmed its loss and the S&P 500 inched higher on Tuesday as details from the latest Federal Reserve meeting showed the U.S. central bank is ready to flood the markets with cheap cash in support of a waning economic recovery.

A move from the Fed is all but priced into the stock market. In their September meeting, Fed policy-makers hinted that the timing of any action could be soon as the minutes of the meeting said they felt further monetary easing could be appropriate "before long."

Increased hopes that the Fed would step in to bolster the economy helped support stocks in recent weeks. The S&P 500 index is up 11.3 percent since the start of September, and last month's performance was one of the best months for stocks in a decade.

"It looks like the Fed is moving closer to another round of quantitative easing," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

"The Fed has almost boxed themselves into a corner in the sense that the market expects some type of activity. The only question is, 'how much and when?'"

The dollar index, a gauge of the greenback against a basket of currencies, erased its earlier gain and was down 0.1 percent in afternoon trading. Investors have of late used fluctuations in the U.S. currency as a trigger to move into or out of stocks. The 30-day correlation between the index and the S&P 500 ticked down to -0.90.

The Dow Jones industrial average dipped 9.20 points, or 0.08 percent, to 11,001.14. The Standard & Poor's 500 edged up just 0.63 or a point, or 0.05 percent, to 1,165.95. The Nasdaq Composite gained 6.43 points, or 0.27 percent, to 2,408.76.

China's bid to cool down its economy offset the Fed's resolve, as it sparked concerns it could crimp global growth. An official Chinese newspaper reported the government raised bank reserve requirements by 50 basis points, the fourth hike this year, due to excessive lending.

The report confirmed a Reuters story on Monday Also on investors' minds are results from Intel Corp, expected after the close. Its shares advanced 0.2 percent to $19.60. Apple, up 0.5 percent at $296.94, led the Nasdaq's advance after Barclays raised its price target on the company's stock. (Reporting by Rodrigo Campos; Additional reporting by Leah Schnurr; Editing by Jan Paschal)

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