* Volatility rises ahead of Fed statement
* Fed seen buying about $500 billion in assets
* Indexes off: Dow 0.1 pct, S&P 0.2 pct, Nasdaq 0.4 pct (Updates to midday, changes byline)
By Rodrigo Campos
NEW YORK, Nov 3 (Reuters) - U.S. stock indexes ticked lower on Wednesday as investors were cautious before the Federal Reserve was expected to announce it would buy bonds in a bid to bolster the economy's mild recovery.
The inverse correlation between stocks and the U.S. dollar was evident, with swings in the value of the greenback affecting equities.
The Fed statement, due at 2:15 p.m. (1815 GMT), was likely to unveil the extent and length of time of the purchases -- widely seen to total some $500 billion.
Volatility was expected if the amount varied significantly from market expectations. The S&P 500 index has risen more than 13 percent since September, helped by speculation of further Fed easing.
"The Fed has backed itself into a corner," said Seth Setrakian, co-head of trading at First New York Securities.
"If they way overshoot and you hear a $1 trillion type number, although the initial reaction may be positive, I can see markets getting nervous ultimately on 'What does the Fed know we don't know, and why are they being so aggressive'?," he said.
Setrakian said the Fed has few options since asset prices have reacted ahead of the news. "Anything less than ($500 billion) would be seen as a material disappointment and generate a selloff."
The Dow Jones industrial average dipped 15.06 points, or 0.13 percent, to 11,173.66. The Standard & Poor's 500 Index fell 2.66 points, or 0.22 percent, to 1,190.91. The Nasdaq Composite Index lost 8.79 points, or 0.35 percent, to 2,524.73.
The CBOE Volatility index, known as Wall Street's "fear gauge," rose 1 percent after ending lower on Tuesday for the first time in more than a week. The index usually moves inversely with the S&P 500, tracking option prices investors are willing to pay as a protection on the underlying stocks.
The S&P 500 has recently been unable to break and hold above its 200-week moving average, now slightly above 1,193 and on a downward slope.
Markets had factored in a Republican takeover of the House of Representatives following Tuesday's midterm elections, analysts said. Republicans also increased their ranks in the Senate, possibly heralding a legislative stalemate when the new Congress begins work in January.
The election turned out much as expected, Setrakian said. "That's why you're seeing a muted reaction, specifically in energy and healthcare," he said. Those sectors were seen as vulnerable to more regulation under a Democratic-controlled Congress.
Weighing on stocks, the dollar edged up 0.2 percent against a basket of currencies. The 50-day correlation between the dollar index and the S&P 500 stands at -0.93, with -1 being a perfect inverse correlation.
Stocks showed little reaction to reports showing the U.S. services sector grew more quickly than expected in October and factory orders in September posted their largest gain in eight months.
Also, a private report showed U.S. private employers added more jobs than expected in October.
(Editing by Kenneth Barry)