* Fed chairman lays out path for policy changes
* U.S. stocks flat as Bernanke views tempered
* Euro zone members set plan to help Greece
(Updates with closing prices)
By Manuela Badawy
NEW YORK, Feb 10 (Reuters) - U.S. stocks edged lower and
prices of Treasuries fell on Wednesday as comments by Federal
Reserve Chairman Ben Bernanke's on the U.S central bank's
strategy as the economy recovers sparked investor jitters.
The euro fell against the dollar amid uncertainty a day
before a European Union summit about a possible bailout of
debt-stricken Greece. News of a possible rescue plan for
Greece, however, helped temper the impact of Bernanke's
comments on Wall Street.
In Europe shares closed higher on the hopes of a rescue
plan for Greece.
The chairman of the Eurogroup as well as France and German
representatives were set to present a plan to aid Greece on
Thursday.
"Expectations are running high that some sort of 'Greece
bailout' package will be confirmed, leaving room for
disappointment if politics get in the way and a comprehensive
financial assistance package does not materialize," said Nick
Chamie, global head of emerging market research at RBC Capital
Markets.
Markets initially reacted negatively to Bernanke's
comments, with investors jittery that a withdrawal of some of
the more than $1 trillion the Federal Reserve has put into the
economy, which has underpinned the markets' rally since last
March, might come to an end sooner rather than later. But
investors later took a more moderate view.
"A little tone that interest rates might go up some time
spooked investors a little bit in the morning," said Alan
Lancz, president of Alan B. Lancz & Associates Inc., an
investment advisory firm in Toledo, Ohio.
"I think we could have been down more," he said, adding
that the news on Greece alleviated "one of the clouds that have
been hanging over the market."
The Dow Jones industrial average <> closed down 0.20
percent, at 10,038.38. The Standard & Poor's 500 Index <.SPX>
ended down 0.22 percent, at 1,068.13. The Nasdaq Composite
Index <> closed down 0.14 percent, at 2,147.87.
Bernanke said in written remarks on Wednesday the U.S.
central bank expects to increase the spread between the
discount rate and the target fed funds rate. For Bernanke's
remarks, see [].
Bernanke's remarks on the discount rate drove up the dollar
against the euro, boosting expectations the U.S. central bank
would start tightening monetary policy earlier than its major
counterparts. Bernanke made clear the time for tightening
monetary policy was still some ways away.
The euro <EUR=> fell 0.45 percent at $1.3727.
The news on Greece also put pressure on the euro, with
some analysts unconvinced that a bailout, if there were one,
would solve all of Greece's problems.
Against the yen, the dollar <JPY=> rose 0.36 percent at
89.97 despite a wider-than-expected report on U.S. trade
deficit in December. [].
The dollar rose against a basket of major trading-partner
currencies, with the U.S. dollar index <.DXY> up 0.27 percent
at 80.078.
In the government debt market, U.S. bond prices were also
hurt by a poor reception in the sale of $25 billion of 10-year
notes, stirring concerns the appetite for huge waves of
government debt may be dwindling.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
10/32, with the yield at 3.6916 percent from 3.65 percent on
Tuesday, while the two-year note <US2YT=RR> was 3/32 lower to
yield 0.89 percent from 0.84 percent.
Bernanke's testimony had set the bearish tone for bonds
early in the day.
MIXED NUMBERS
European shares closed higher on hopes of a possible rescue
plan for Greece, with banks stronger, but gains were pared
after Bernanke outlined fiscal tightening plans.
The FTSEurofirst 300 index <> of top European shares
rose for a third day, closing 0.6 percent up at 987.13 points,
down from the day's high of 996.12.
The index is up 52.9 percent from its lifetime low of March
9, 2009, but is down 8.1 percent from a 15-month high it
reached on Jan 11.
Oil prices rose after the U.S. Energy Information
Administration raised its forecast for crude demand and prices
this year.
Crude oil <CLc1> settled up 77 cents, or 1.04 percent at
$74.52 a barrel, rising for the third consecutive day during
which it has gained a total $3.33, or 4.68 percent.
Gold prices <XAU=> eased 0.40 percent to $1072.6 on the
back of stronger U.S. dollar.
The Reuters/Jefferies CRB Index <.CRB>, a benchmark basket
of 19 futures, was up 0.42 percent, at 266.23.
World equities as measured by the MSCI All-Country World
Index <.MIWD00000PUS> ended flat.
(Additional reporting by Caroline Valtkevitch, Gertrude
Chavez-Dreyfuss; Editing by Leslie Adler)
