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.
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.
The Dow Jones industrial average <.DJI> 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 <.IXIC> was down 28.52 points, or 1.24 percent, at 2,277.17.
Tech companies pressured the Nasdaq, with chipmakers Intel Corp
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
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)