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Stocks, dollar turn negative after Fed minutes

Traders work inside a post on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 30, 2017. REUTERS/Brendan McDermid

By Herbert Lash

NEW YORK (Reuters) - U.S. stocks turned negative and the dollar slipped on Wednesday after minutes from the Federal Reserve showed planned changes in its bond investment policy, reversing a rally spurred by a strong jobs report earlier in the day.

Most Fed policy-makers think the central bank should take steps to begin trimming its $4.5 trillion balance sheet later this year as long as U.S. economic data holds up, minutes on Tuesday showed.

"A little bit of the optimism has ebbed out of the market," said Chris Zaccarelli, chief investment officer at Cornerstone Financial Partners in Huntersville, North Carolina.

Wall Street turned negative after the minutes from the Fed's policy-setting meeting of March 14-15.

An earlier stocks rally was driven by a report from payrolls processor ADP, which showed the most workers were added in March since December 2014, pointing to further tightening of the labor market.

"It may be a bit negative for equities and that's put in a bid for Treasuries," said Alex Manzara, vice president at R.J. O'Brien and Associates in Chicago.

The Dow Jones Industrial Average (.DJI) fell 41.02 points, or 0.2 percent, to 20,648.22, the S&P 500 (.SPX) lost 7.25 points, or 0.31 percent, to 2,352.91 and the Nasdaq Composite (.IXIC) dropped 34.13 points, or 0.58 percent, to 5,864.48.

MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.1 percent.

European stocks rose on the ADP report but pared gains to close flat. The pan-European FTSEurofirst 300 index (.FTEU3) fell 0.01 percent to close at a provisional 1,497.68, while the STOXX Europe 600 Index (.STOXX), a broad mix of companies from 17 regional countries, rose 0.02 percent.

The U.S. dollar index (.DXY), which had gained after the ADP labor report, turned lower and was last down 0.1 percent.

Oil prices rose on an outage at the largest UK North Sea oil field, but gains were tempered by a surprise increase in U.S. crude inventories to a record high.

Prices rose early and then seesawed after the U.S. government reported a weekly rise in crude inventories (USOILC=ECI) of 1.6 million barrels.

Analysts had expected a decrease of 435,000 barrels, and the build reported by the Energy Information Administration came as a double surprise after an industry group had reported a draw.

U.S. crude (CLcv1) rose 12 cents to settle at $51.15 a barrel while Brent (LCOcv1) settled up 19 cents at $54.53.

The ADP data came ahead of the Labor Department's monthly non-farm payrolls report on Friday, which includes both public and private-sector employment. Economists polled by Reuters expect the report to show U.S. employers added 180,000 jobs in March.

Benchmark 10-year notes last rose 4/32 in price to yield 2.3354 percent, down from 2.35 percent late Tuesday.

(Reporting by Herbert Lash; Editing by Richard Chang and Nick Zieminski)