* US stocks dip, Treasuries rally, commodities fall
* Fed's economic view points to low rates for long time
* US new home sales hit record low, add to growth fears
* Concerns over Europe's banks spur sales of risky assets
(Updates with U.S. markets' close)
By Walter Brandimarte
NEW YORK, June 23 (Reuters) - The dollar weakened across
the board while Treasuries rallied on Wednesday after the U.S.
Federal Reserve acknowledged a faltering economic recovery and
data showed sales of new U.S. homes fell to a lifetime low.
U.S. stocks, which traded mostly down since the market's
open, zigzagged and closed mostly lower after the Fed issued
its monetary policy statement, which suggested interest rates
will remain near zero longer than expected.
The Dow industrials, however, eked out a tiny gain just as
the regular sesssion ended.
In the statement, U.S. policy-makers repeated that the
economy will continue to gradually emerge from recession, but
took note of pockets of economic weakness. []
Without directly mentioning Europe's debt problems, they
said financial conditions have become less supportive of
growth, "largely reflecting developments abroad."
"There's no rate hike expected for the foreseeable future
- at least not until the end of the year, if not 2011," said
Michael Woolfolk, senior currency strategist at BNY Mellon in
New York. "The longer the Fed keeps kicking the can down the
road, the less positive this is for the U.S. dollar outlook."
The dollar slid 0.37 percent against a basket of major
trading-partner currencies, according to the U.S. Dollar Index
<.DXY>.
The euro <EUR=>, which had weakened earlier on renewed
fears about the European banking system, gained 0.36 percent
to $1.2313.
Against the Japanese yen, the U.S. currency <JPY=> slid
0.80 percent to 89.84.
Concerns about the pace of the economic recovery were on
the rise since the beginning of the session, when government
data showed sales of U.S. single-family homes dropped 32.7
percent in May to a seasonally adjusted annual rate of 300,000
units, the lowest level since record keeping started in 1963.
The drop unwound two months of gains, which had been
inspired by a government tax credit for home buyers, and
increased investors' aversion to risk in general.
WHEN DOVES FLY, THE DOW RISES
While the Fed's softened economic view weighed on
sentiment, prospects of a prolonged period of near-zero
interest rates in the United States offered some support to
stocks, tipping the Dow into positive territory in late
afternoon.
The Dow Jones industrial average <> edged up 4.92
points, or 0.05 percent, to end at 10,298.44, while the
Standard & Poor's 500 Index <.SPX> dropped 3.27 points, or
0.30 percent, to 1,092.04. The Nasdaq Composite Index <>
fell 7.57 points, or 0.33 percent, to 2,254.23
"Just when one thought the FOMC couldn't get more dovish,
they get more dovish, specifically on inflation," said Peter
Boockvar, equity strategist at Miller Tabak & CO in New York.
"Rates will stay 'exceptionally low' for a very, very, very,
very long time."
In Europe, the FTSEurofirst 300 index <> of top
shares closed down 1.02 percent before the Fed statement, with
technical charts suggesting there could be more declines over
the coming days.
"We have fallen back after U.S. new home sales data and,
in this context, we expect the market to continue to go lower
over the next week," said Christian Stocker, strategist at
UniCredit Global Research in Munich.
Financial stocks ranked among the top decliners in Europe,
with Barclays <BARC.L>, BNP Paribas <BNPP.PA>, Credit Agricole
<CAGR.PA> and Societe Generale <SOGN.PA> down 1.4 percent to
3.2 percent.
Concerns about Europe's banking system were on the rise
after Credit Agricole pushed back profit targets for its
struggling Greek unit Emporiki <CBGr.AT> and said it would
take a 400-million-euro ($536.7 million) write-down as Greece
fights to manage its debt load. []
MSCI's all-country stock index <.MIWD00000PUS> dropped
0.83 percent, while the firm's index of emerging market stocks
<.MSCIEF> fell 0.76 percent.
BONDS JUMP, OIL AND GOLD SLIP
Benchmark 10-year U.S. Treasury notes <US10YT=RR> jumped
11/32, with the yield falling to 3.12 percent from Tuesday's
close of 3.17 as the Fed said in its statement that "inflation
is likely to be subdued for some time."
The yield curve also flattened as investors bought
longer-dated Treasuries on the rationale that they would be a
safe place to park savings in a deteriorating economic
environment.
The more dovish Fed tone could also lead some investors to
wonder whether the U.S. central bank might restart its
quantitative easing program of Treasuries purchases if the
data begins a sharper downturn from here.
U.S. crude oil futures prices <CLc1> fell $1.50, or 1.93
percent, to settle at $76.35 a barrel, also pressured by a
sharp increase in domestic crude stocks last week and a
forecast from the International Energy Agency that supplies
would be comfortable for the next five years.
Gold prices shrugged off the Fed's view. In late afternoon
trading, spot gold <XAU=> traded at $1,234.55 an ounce, close
to where it was on Tuesday in late New York trading, when it
was quoted at $1.239.
(Reporting by Walter Brandimarte; Additional reporting by
Ryan Vlastelica, Burton Frierson and Gertrude Chavez-Dreyfuss;
Editing by Jan Paschal)
