(Updates to U.S. stock market close, adds reaction to Fed)
* Oil prices end mixed despite big U.S. crude stock drawdown
* Dollar gains on safe-haven buying, Treasuries up too
* Emerging market currencies sink
By Rodrigo Campos
NEW YORK, Jan 27 (Reuters) - Stocks fell around the world on Wednesday as investors turned more cautious over stretched valuations and the economic impact of the COVID-19 pandemic, while the dollar rose on its safe-haven appeal.
Oil prices were little changed as demand concerns were mostly offset by a large drop in U.S. crude inventories.
Stocks in the United States added to losses after the Federal Reserve left its key rate near zero and made no change to its monthly bond purchases, while flagging a potential slowdown in the pace of the economic recovery. Street had been weighed earlier by a slump in Boeing (NYSE:BA) Co BA.N and by hedge funds dumping long positions to cover a short squeeze in GameStop Corp (NYSE:GME) GME.N and AMC Entertainment AMC.N . are circulating that some investment funds might be quickly closing out positions as a way of shoring up their cash," said David Madden, market analyst at CMC Markets UK.
"It is early days yet but we might see selling pressure ramp up for fear there could be a stampede for the exit."
The Dow Jones Industrial Average .DJI fell 2.05%, the S&P 500 .SPX lost 2.57% and the Nasdaq Composite .IXIC dropped 2.61%.
MSCI's benchmark for global equity markets .MIWD00000PUS fell 2.04% to 652.5, while its index for emerging markets stocks .MSCIEF fell 1.25%.
The pan-European STOXX 600 index .STOXX lost 1.16% after the German government slashed its growth forecast for this year, while talk of further interest rate cuts by the European Central Bank hit banking stocks and the euro.
In currency trading, the dollar index =USD rose 0.47%, with the euro EUR= down 0.4% to $1.2111.
"I think if anything the dollar is finding support from the Fed's more cautious message," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
"I would say that the Fed having noted the recent moderation in the pace of the recovery is adding to concerns about the near-term outlook. The risk-off move today has gained traction in the Fed's more cautious outlook for growth."
The Japanese yen JPY= weakened 0.47% versus the greenback at 104.09 per dollar.
In emerging markets, currencies in Russia RUB= , Brazil BRL= , Mexico MXN= , and South Africa ZAR= all lost over 1% on the day versus the greenback.
U.S. Treasury yields slid in line with weaker stocks as risk appetite hit a wall.
"(The Fed) did sound a little bit more downbeat, a little bit more concerned about the pace of the recovery and the pace of progress on vaccinations as well," said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities in New York.
"I think it's meant to convey that they still realize there's still quite a bit of weakness and that we've a long way to go before the recovery really takes off."
Benchmark 10-year notes US10YT=RR last rose 9/32 in price to yield 1.011%, from 1.04% late on Tuesday.
In commodities markets, oil prices were little changed despite a massive drawdown in U.S. crude inventories, as ongoing concerns about the coronavirus pandemic tempered buying interest.
Brent crude futures LCOc1 fell $0.42 to $55.49 a barrel. U.S. crude futures CLc1 slid $0.04 to $52.57 a barrel.
Gold prices fell, pressured in part by the dollar strength.
Spot gold XAU= dropped 0.5% to $1,841.13 an ounce. Silver XAG= fell 1.13% to $25.16.
Bitcoin BTC=BTSP last fell 3.91% to $31,234.68.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Emerging market assets in 2021
http://tmsnrt.rs/2ihRugV Global asset performance year to date
http://tmsnrt.rs/2yaDPgn Fed Balance Sheet
https://tmsnrt.rs/3iOsevC
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