* S&P 500 falls, a day after hitting record highs
* Dollar down after U.S. private sector jobs data
* Fed policy statement due Wednesday afternoon
* U.S. and China manufacturing data weighs on oil prices
By Caroline Valetkevitch
NEW YORK, May 1 The dollar hit a two-month low on Wednesday after disappointing U.S. private-sector job growth reinforced expectations the Federal Reserve will maintain its loose monetary policy, while oil prices slid more than 3 percent as the latest data added to concerns about global growth.
Oil fell sharply after manufacturing data from both the United States and China, the world's two biggest energy consumers, raised new doubts about the strength of the global economy. Brent crude slid below $100 a barrel for the first time since April 23.
The weak U.S. data also drove U.S. Treasury yields down, with the benchmark 10-year note yield hitting the lowest intra-day level so far this year.
The Fed, which is due to announce its policy statement at 2 p.m. (1800 GMT) on Wednesday at the close of its two-day meeting, has made the U.S. unemployment rate a key factor in its policy decisions.
"We think the Fed will be as dovish as it can afford to be, and as such the softness of the dollar is justified, and if anything it could extend a bit further," said Adam Cole, global head of FX strategy at RBC Capital Markets.
Payrolls processor ADP reported that private employers added 119,000 jobs in April, well below economists' expectations for 150,000 new jobs.
The dollar index, which measures the U.S. currency's value against a basket of currencies, dropped as low as 81.331, its weakest level since Feb. 25. It was last at 81.551, down 0.2 percent.
World stock markets were mostly lower. U.S. stocks fell, one day after the S&P 500 posted both record intraday and closing highs, hurt by the jobs data and separate data showing the pace of U.S. manufacturing growth slowed in April. Lower-than-expected sales from drug maker Merck & Co Inc dragged on the Dow, with Merck shares down 2 percent at $46.05.
The Dow Jones industrial average was down 89.96 points, or 0.61 percent, at 14,749.84. The Standard & Poor's 500 Index was down 9.73 points, or 0.61 percent, at 1,587.84. The Nasdaq Composite Index was down 23.37 points, or 0.70 percent, at 3,305.42.
"Basically, we've had six weeks of weakening data, but I think this may be a speed bump rather than a trend," said Jack De Gan, chief investment officer of Harbor Advisory. "If we can overcome this by the end of the day, we are breaking out of an old high and heading into a new."
MSCI's world equity index was down 0.3 percent, while Britain's FTSE 100 was up 0.4 percent, led by gains in banks on expectations of further monetary easing by the European Central Bank when it meets on Thursday. The Paris and Frankfurt stock markets were closed for the May Day holiday.
In the U.S. Treasury market, prices rose after the ADP report, which was the latest piece of evidence to suggest slower U.S. economic growth.
The benchmark 10-year Treasury note US10YT=RR was up 16/32, its yield easing 1.619 percent, the lowest intra-day level so far this year.
The Federal Reserve is widely expected to maintain its monthly purchases of $85 billion in bonds as it looks to support an economic recovery that is nearly four years old but still too weak for the job market to truly heal.
With inflation also slipping, Fed officials could again find themselves in the uncomfortable position of having to shift from talk of curbing stimulus to the possibility of doing more.
On Thursday, the ECB is expected to cut its main interest rate to a record low of 0.5 percent.
Economists are eyeing whether the ECB can do more. The central bank lacks the aggressive policies many of its major peers are using, and the mismatch in approaches, as well as the dollar's weakness, has kept upward pressure on the euro.
With the May Day holiday curbing European trading, the euro rose 0.2 percent to $1.3188. It earlier rose to $1.3242, according to Reuters data, its highest level since Feb. 25.
Oil prices slid as the fresh concerns over economic growth in China and the United States and a build-up of U.S. crude inventories weakened the demand outlook. Brent crude futures were down $3.10 at $99.27 a barrel. U.S. oil was down $2.95 at $90.51.
Growth in China's manufacturing sector unexpectedly slowed in April, with the official purchasing managers' index coming in at a reading of 50.6 after hitting an 11-month high of 50.9 in March as new export orders fell. The data raised fresh doubts about the strength of China's economy after a disappointing first quarter. A reading above 50 separates growth from contraction.
Copper slid on concerns over growth in top metal consumer China. Benchmark copper ended 3.7 percent weaker at $6,795 per tonne after touching a session low of $6,786.25, close to the 18-month lows hit last week.
Gold prices also were down sharply, with spot gold falling more than 2 percent to $1,442.94.