Blue Chip Stocks End Flat, Dollar Rises Vs Euro

U.S. blue chip stocks ended flat on Tuesday, clawing back earlier losses as investors bought on dips a day.

U.S. blue chip stocks ended flat on Tuesday, clawing back earlier losses as investors bought on dips a day ahead of the Federal Reserve's policy meeting, while the dollar rose against the euro in technically driven trade.

Uncertainty over how the Fed will describe an environment of slowing inflation and weakening economic growth in the statement accompanying its decision on interest rates on Wednesday pushed government bond investors to the sidelines.

The Fed is expected to leave rates unchanged, but investors will scrutinize the wording of policy-makers' statement for clues on the central bank's next move on interest rates, widely expected to be an easing later this year.

Blue chip shares snapped a five-session winning streak, tracking their global peers, with investors pausing to book profits.

A smattering of earnings disappointments helped cool enthusiasm for stocks. Shares of insurance broker Marsh & McLennan Cos., financial advisory firm Lazard Ltd. and online travel agency Expedia Inc. all dropped after the companies posted results that missed analysts' forecasts.

Stocks had rallied for most of April and May on robust first-quarter earnings and a wave of major takeover deals.

"There has just been a steady rise off every intra-day dip we've had," said Joe Saluzzi, co-manager of Themis Trading in Chatham, New Jersey. "What it's going to take to break that trend is a major news event -- it can't just be selling off for the sake of selling off."

The Dow Jones industrial average ended down 3.90 points, or 0.03 percent, at 13,309.07, having earlier traded down as much as 75 points.

The Standard & Poor's 500 Index was down 1.76 points, or 0.12 percent, at 1,507.72. The Nasdaq Composite Index was up 0.80 points, or 0.03 percent, at 2,571.75.

In Europe, the FTSEurofirst 300 index closed down 0.8 percent at 1,581.4 points on broad-based selling, backing off the previous session's six-and-a-half-year highs.

In Japan, profit-taking took the Nikkei down 0.07 percent, or 12.99 points, at 17,656.

RATE CUT VIEWS HOLD DOLLAR BACK VS YEN

The dollar climbed against the euro, but perceptions of lower interest rates later this year pulled the greenback down versus the yen. Traders also sold the euro against the yen.

The euro's slide against the dollar was mostly a technical affair, with traders taking profits after the currency fell in five of the seven sessions since touching a record high above $1.3680.

The downward pressure triggered automatic orders to sell euros that pushed it to $1.3516, according to Reuters data, a three-week low, before it edged back to $1.3540.

"The dollar is just coming up for air, having a short-term respite," said David Mozina, foreign exchange strategist at Lehman Brothers in New York. "The growth and inflation mix in the euro zone is far better than in the United States."

Central banks in the euro zone and Britain also meet later this week, which could cause volatility on currency markets.

The Bank of England is expected to lift rates to 5.5 percent, the highest level in the Group of Seven industrialized countries, while the European Central Bank is seen signaling a rate hike in June.

The dollar's rise against the euro helped to pull gold off Monday's two-week highs. Gold for June delivery on the COMEX division of the New York Mercantile Exchange ended down $3.00 at $687.40 an ounce.

BONDS FLAT IN CAUTIOUS TRADE

Caution ahead of the Fed's meeting sapped interest in government bonds. Benchmark 10-year Treasury notes traded 1/32 lower in price for a yield of 4.64 percent from 4.63 percent late on Monday. Bond yields move inversely to prices.

"Moving to a balanced risks assessment and showing increased concerns for the downside risks to growth would be enough to cause the market to undergo a significant steepening rally led by the front end as the market moves forward the date of a potential easing cycle," said Joseph Shatz, government strategist at Merrill Lynch Government Securities in New York.

Bad weather forecasts and pipeline attacks in Nigeria pulled U.S. crude oil futures to a higher finish for the first time in seven sessions. On the New York Mercantile Exchange, June crude settled 79 cents, or 1.3 percent higher, at $62.26 per barrel.