US STOCKS-Markets fall after Fed unveils stimulus plan

* Fed announces plan to buy $600 bln in gov’t bonds

* “Not surprising to sell on the news” — strategist

* Indexes off: Dow 0.3 pct, S&P 0.3 pct, Nasdaq 0.2 pct

* For up-to-the-minute market news see [STXNEWS/US]
(Updates with Fed statement, changes byline)

By Ryan Vlastelica

NEW YORK, Nov 3 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) fell after a brief
pop higher in volatile trading on Wednesday after the Federal
Reserve announced a controversial policy to buy government
bonds in an attempt to breathe new life into the struggling
U.S. economy.

The Fed will buy a further $600 billion of government bonds
by June 2011, a package that was larger than expected. The
central bank also described the economy as “slow” and said
employers remained reluctant to add to payrolls. For details,
see [ID:nN03120542].

“The Fed is still very worried about the potential for
deflation, and their comments on employers suggests that
Friday’s payroll number could be disappointing,” said Nicholas
Colas, chief market strategist at the ConvergEx Group in New
York.

The Dow Jones industrial average (.DJI: ) dropped 32.24
points, or 0.29 percent, to 11,156.48. The Standard & Poor’s
500 Index (.SPX: ) dropped 3.48 points, or 0.29 percent, to
1,190.09. The Nasdaq Composite Index (.IXIC: ) dropped 5.00
points, or 0.20 percent, to 2,528.52.

The inverse correlation between stocks and the U.S. dollar
was evident, with the greenback rising after the statement. The
CBOE Volatility index (.VIX: ), a favored gauge of investor
anxiety, fell 1.3 percent in volatile afternoon trading. 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.

Markets had traded lower earlier as investors awaited
details on the quantitative easing plan and digested the
results of Tuesday’s elections in which Republicans regained
control of the House and made inroads in the Senate, as
expected.

“The Republican victory and quantitative easing are both
net positives for the market, but it’s not surprising that we
would sell on the news,” said Alec Young, equity strategist at
S&P Equity Research in New York. “I don’t think there’s a break
in the trend, however, which remains up.”

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. The index has gained about 14 percent
since the start of September on the hope of Fed action and
Republican electoral victories. [ID:nSGE6A205O].

Weighing on stocks, the dollar edged up 0.2 percent against
a basket of currencies (.DXY: ). The 50-day correlation between
the dollar index (Read more about the global trade. ) and the S&P 500 stands at -0.93, with -1 being
a perfect inverse correlation.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For stories on the U.S. elections: [ID:nUSVOTE] For a graphic on the election results:

http://link.reuters.com/wav53q
For a special report on Fed quantitative easing:

http://link.reuters.com/pyb23q

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

In company news, Time Warner Inc (TWX.N: ) fell 1.9 percent
to $31.78 after the media company reported its third-quarter
results. [ID:nN03285141]

Housing stocks also fell after PulteGroup Inc (PHM.N: )
posted an adjusted third-quarter loss that widened from the
prior year. The stock lost 7.1 percent to $7.50.
[ID:nN0355645]
(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)

US STOCKS-Markets fall after Fed unveils stimulus plan