* Investors uncertain about extent of Fed asset-buying
* U.S. Treasuries fall before two-year note sale
* Stocks weaken on lackluster earnings, outlooks
(Updates with U.S. markets' close)
By Manuela Badawy
NEW YORK, Oct 26 (Reuters) - The dollar rose broadly on
Tuesday as investors speculated the Federal Reserve would
proceed more cautiously in announcing any asset-buying next
week, scaling back bets against the greenback.
Stocks, meanwhile, ended flat to lower on earnings and
ahead of next week's U.S. elections and the Fed meeting to
decide on more economic stimulus.
U.S. government debt prices fell ahead of more new debt
supply. But traders said a big retreat was unlikely because of
the Fed meeting - at which the U.S. central bank is expected to
say it will buy bonds via quantitative easing to revive growth
and avert deflation.
Most currency traders expect the Fed to opt for more
quantitative easing, but some easing is priced into an already
weak dollar. The questions of how much easing the Fed's Open
Market Committee does and how fast have kept investors edgy
about building more bearish bets on the dollar.
Japanese stocks were poised to open higher, with the
December Nikkei 225 stock futures contract <0#NK:> in Chicago
up 20 points at 9,455.
QE essentially involves printing more money, so a flood of
dollars on the market would debase the currency's value.
"Everything is dependent on the FOMC and people don't want
to take aggressive positions ahead of this very big decision,"
said Stephan Maier, currency strategist at Unicredit in Milan.
The Fed meets next on Nov. 2-3.
But some investors have begun to reconsider the likelihood
of a big burst of QE after comments from Fed officials on
Monday.
"I think it's still possible that QE II is not a done deal
for November, even though the market has been trading as if it
is," said Brian Dolan, chief currency strategist at Forex.com
in Bedminster, New Jersey. He said the Fed might put off action
until the first quarter.
The dollar was up against major currencies, with the U.S.
Dollar Index <.DXY> climbing 0.74 percent at 77.671.
The euro <EUR=> was down 0.78 percent at $1.3854 from a
previous session close of $1.3963. Against the Japanese yen,
the dollar <JPY=> was up 0.83 percent at 81.45 from a previous
session close of 80.780.
The dollar edged away from 15-year lows after Japan's
finance minister Yoshihiko Noda warned the government would
"act decisively" in currency markets if needed.
[]
STOCKS TURN WEAKER
U.S. stocks ended little changed before the potential
market tumult of next week's U.S. elections and likely
announcement of more stimulus from the Federal Reserve.
Next week's high-profile events could signal shifts in both
monetary policy and legislative direction, raising fears that
trumped Tuesday's earnings news and economic reports.
"You have a double whammy next week: Election Day and the
Fed announcement," said Doug Roberts, chief investment
strategist at Channel Capital Research.com in Shrewsbury, New
Jersey.
The Dow Jones industrial average <> gained 5.41 points,
or 0.05 percent, to 11,169.46. The Standard & Poor's 500 Index
<.SPX> gained 0.02 point to 1,185.64. The Nasdaq Composite
Index <> gained 6.44 points, or 0.26 percent, to
2,497.29.
Weak revenue forecasts from drugmaker Bristol-Myers Squibb
Co <BMY.N> and chip manufacturer Texas Instruments Inc <TXN.N>
pulled drug and chipmaker stocks lower.
Bristol-Myers fell 1.1 percent to $26.86 and Texas
Instruments shed 0.3 percent to 28.88. The NYSE Arca
Pharmaceutical index <.DRG> lost 0.6 percent and the PHLX
Semiconductor index <.SOX> dipped 0.4 percent.
MSCI's all-country world stock index <.MIWD00000PUS> was
down 0.4 percent with its emerging market sub-index <.MSCIEF>
rising 0.12 percent.
The pan-European FTSEurofirst 300 <> index of top
shares closed down 0.2 percent at 1,090.56 points, after rising
0.3 percent on Monday to end near a six-month high.
European equities fell on uncertainty about QE and comments
from ArcelorMittal <ISPA.AS> that the basic resources sector
faced extended weakness.
U.S. government debt fell on data showing
higher-than-expected consumer confidence and as traders cut
prices ahead of supply .
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 21/32, with the yield at 2.643 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 2/32, with the yield at
0.3954 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
down 46/32, with the yield at 3.9992 percent.
In energy and commodities, crude oil <CLc1> fell 0.06
percent to $82.47 per barrel while spot gold <XAU=> rose 0.03
percent, to $1339.80 an ounce.
(Additional reporting by Ellen Freilich, Nick Olivari, and
Chuck Mikolajczak in New York; Editing by Kenneth Barry)
