* Fed to take steps to strengthen recovery
* Central bank to buy Treasuries with maturing debt
* Defensive stocks among gainers as concerns remain
* Stocks off: Dow 0.5 pct, S&P 0.6 pct, Nasdaq 1.2 pct
* For up-to-the-minute market news see []
(Updates to close)
By Ryan Vlastelica
NEW YORK, Aug 10 (Reuters) - U.S. stocks fell on Tuesday
but closed off their lows after the Federal Reserve said it
would take new steps to counter a weak recovery.
The Dow, which was down about 100 points before the Fed's
announcement, briefly turned positive, though buying interest
waned on the Fed's more pessimistic assessment of the economy.
The Fed's Open Market Committee said in a post-meeting
statement that it would begin funneling proceeds from maturing
mortgage bonds into longer-term government debt to keep
borrowing costs low. For details, see []
The stock market's lukewarm response suggested investors
didn't believe the actions would have much immediate impact on
the weak labor market and slow consumer spending, two headwinds
facing the recovery.
"The Fed is kind of caught in a spot where it isn't sure
what to do, so it went halfway," said Michael O'Rourke, chief
market strategist at BTIG LLC in New York. "This is an
insurance move, one it probably took grudgingly just to meet
market expectations."
Stocks that ended the day higher belonged to defensive
sectors, those that tend to hold up better in a weak economy,
such as utilities and health care.
"[] are saying maybe it's a little bit safer or
more profitable to go down a little on the risk spectrum, but
not too far out," said Doug Roberts, chief investment
strategist at Channel Capital Research.com in Shrewsbury, New
Jersey.
The Dow Jones industrial average <> was down 54.50
points, or 0.51 percent, at 10,644.25. The Standard & Poor's
500 Index <.SPX> was down 6.73 points, or 0.60 percent, at
1,121.06. The Nasdaq Composite Index <> was down 28.52
points, or 1.24 percent, at 2,277.17.
Tech companies pressured the Nasdaq, with chipmakers Intel
Corp <INTC.O> and Advanced Micro Devices Inc <AMD.N> falling on
analysts' downgrades, while Novell Inc <NOVL.O> dropped a day
after cutting its third-quarter revenue outlook.
[] and [].
Intel, a Dow component, lost 4 percent to $19.82 while AMD
lost 8 percent to $6.83 and Novel sank 3.2 percent to $5.82.
Walt Disney Co <DIS.N> rose 1.4 percent in extended trading
after the Dow component reported its third-quarter results.
[]
All three indexes were down more than 1 percent before the
Fed's statement, with the S&P breaking below its 200-day moving
average for a time. Treasuries prices rallied on the Fed
statement about purchasing government debt.
Evidence that China's rapid growth was easing adding to
bearish sentiment in the stock market. Weaker-than-expected
Chinese imports left commodity and energy stocks lower. The S&P
materials index <.GSPM> and energy index <.GSPE> both fell 1
percent. []
"If China were to slow back down to something less than 8
percent, you'd see a sharp decline in copper prices and all
kinds of industrial commodity prices," said Paul Kasriel,
director of economic research at Northern Trust in Chicago.
Volume was light, with about 7.44 billion shares traded on
the New York Stock Exchange, the American Stock Exchange and
Nasdaq, well below last year's estimated daily average of 9.65
billion.
Declining stocks outnumbered advancing ones on the New York
Stock Exchange by a ratio of about eleven to four. On the
Nasdaq, about four stocks fell for every one that rose.
(Reporting by Ryan Vlastelica; Additional reporting by Leah
Schnurr; Editing by Kenneth Barry)
