* Investors looking for stimulus clarity with Fed meeting
* U.S. budget deal clears crucial vote in Senate
* KFN shares rise after KKR plan to pay $2.6 billion for firm
* Indexes: Dow flat, S&P down 0.1 pct, Nasdaq flat
NEW YORK, Dec 17 (Reuters) - U.S. stocks were flat on Tuesday, with investors reluctant to make big bets before results of the latest Federal Reserve policy-setting meeting, which could give some clarity as to when the central bank will begin trimming its stimulus.
Major stock indexes briefly extended losses after a two-year U.S. budget deal cleared a Senate procedural vote that all but assured its passage by the Senate as early as Wednesday.
The policy-setting Federal Open Market Committee is expected to issue a statement on Wednesday at the meeting's conclusion. While it isn't expected to start winding down its purchases of $85 billion a month in bonds until March, recent stronger-than-expected economic data seemed to increase the odds that tapering could occur sooner.
The Fed has said it would begin to slow the program when certain economic indicators meet its targets, and some market participants believe the U.S. central bank will upgrade its economic forecasts in the meeting.
"The most recent data has pulled forward expectations on when tapering could start," said Hayes Miller, who helps oversee about $57 billion as head of asset allocation in North America at Baring Asset Management in Boston.
"We think the Fed will err on the side of caution, but everyone is taking a wait-and-see attitude."
The CBOE Volatility index VIX, a measure of investor anxiety, dipped 0.9 percent. Earlier, it rose 2.3 percent to its highest level since mid-October.
U.S. consumer prices were flat in November, but a bounce back in the annual inflation rate from a four-year low will probably give the Fed cover to start the taper. Separate data showed the U.S. current account deficit was the smallest in four years in the third quarter as exports increased and more income was earned abroad.
The Dow Jones industrial average was up 7.19 points, or 0.05 percent, at 15,891.76. The Standard & Poor's 500 Index was down 2.12 points, or 0.12 percent, at 1,784.42. The Nasdaq Composite Index was up 3.91 points, or 0.10 percent, at 4,033.42.
In corporate news, specialty finance company KKR Financial Holdings rose 27.5 percent to $12.05 a day after KKR & Co said it would acquire the company for $2.6 billion. KKR slipped 2.9 percent to $24.36.
Facebook shares rose 1.3 percent to $54.48 after the Wall Street Journal reported the social network will begin selling video ads later this week.
Shares of 3M rose 2.6 percent to $131.02 after the industrial conglomerate affirmed its outlook and raised its dividend.
Boeing's board raised the company's dividend about 50 percent on Monday and approved $10 billion in new share buyback authority that the company said it would use in the next two to three years. Shares rose 1.8 percent to $137.12.
AT&T said it would sell its wireline operations in Connecticut to Frontier Communications for $2 billion in cash, partly to fund the expansion of its 4G network. Frontier shares jumped 8.5 percent to $4.77 while AT&T shares were down 0.9 percent at $33.84.