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NEW YORK: Stocks on world markets and the dollar gained on Tuesday, though Wall Street fell, as expectations remained intact that the Federal Reserve will maintain its stimulus program to bolster the nascent US economic recovery.
A minor lull in the week's busy schedule of central bank meetings and US data initially offered a break from recent sharp moves. But as European markets wound down, the dollar surrendered some gains against major currencies and US stock indices moved sharply lower.
Investors were already holding off making big bets until Friday's US non-farm payrolls report shows the employment situation, the key factor for the Fed's decision on monetary policy. Without a major data driver other than Monday's US factory activity, there was even less incentive to trade.
Some analysts were pointing to technical factors to say the US stock market, with the S&P 500 up more than 15 percent so far this year, was not as strong as it looks even before it began to swoon.
"With no real catalysts to push us in one direction or another but with plenty of catalysts on the horizon I am not surprised to see markets trending sideways," said Art Hogan, managing director at Lazard Capital Markets in New York.
The Dow Jones industrial average was down 108.36 points, or 0.71 percent, at 15,145.67. The Standard & Poor's 500 Index was down 11.48 points, or 0.70 percent, at 1,628.94. The Nasdaq Composite Index was down 22.22 points, or 0.64 percent, at 3,443.15.
European stocks were off the highs of the day but closed 0.3 percent higher and on course to snap a two-day losing streak that had left them at their lowest level since early May.
MSCI's world share index, which tracks stocks in 45 countries, was up 0.02 percent.
"It seems like the market just wants to go higher and higher, but one thing that worries me is the advance-decline numbers, which hit the worst in four years yesterday," said Frank Gretz, market analyst and technician for brokerage Wellington Shields & Co. in New York. Gretz was speaking on the US stock market.
The ratio of advancing stocks to declining stocks is used to gauge the strength of the index price trend and the chance it will reverse.
ECB MEETING
With investors also keeping positions tight ahead of the European Central Bank and Bank of England monthly meetings on Thursday, German Bund futures dipped and peripheral euro zone debt edged up.
A 10-month rally in euro zone debt has waned in recent weeks as talk of a cut in Fed stimulus has pushed up yields.
The benchmark 10-year US Treasury note was up 1/32, the yield at 2.1230 percent.
On Wednesday, the market will get an anecdotal look at US economic conditions from the Fed's Beige Book. A preliminary view on US jobs will come with the ADP national employment data for May.
Commodity markets were steadier. Copper climbed for a second session, while gold was slightly soft.
After the volatility of recent days caused by an escalation of political tensions, Turkish shares and the lira regained ground. That meant that most of the bigger moves of the day were once again on Asian stock markets.
Japan's Nikkei rose 2 percent, its biggest one-day rise in three weeks as currency swings amplified moves ahead of Wednesday's announcement from Prime Minister Shinzo Abe on the third leg of his "Abenomics" stimulus strategy.
The Nikkei was at a 5-1/2-year peak and up more than 50 percent on the year until two weeks ago but has since lost 15 percent as doubts about the $1.4 trillion stimulus drive have crept in.
Abe's latest changes are likely to center on economic reforms but sources told Reuters the government could also include steps urging Japan's public pension funds to boost their investment in equities and overseas.
"We are right at the start of a multi-year process probably," said Grant Lewis, a Daiwa Securities economist in London.
The dollar gained 0.6 percent against the yen but was off the session high. The euro was down 0.1 percent against the dollar.
The firmer U.S dollar also pushed the kiwi dollar lower.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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