* TSX down 10.30 points, or 0.08 percent, at 12,671.12
* Fed to buy $600 bln of bonds by end of Q2 2011
* Focus on Potash Corp gov't decision (Updates to close, adds quote)
By Jennifer Kwan
TORONTO, Nov 3 (Reuters) - Toronto's main stock index closed lower on Wednesday, but well off its session low after the U.S. Federal Reserve committed to buy $600 billion more in government bonds to revive the U.S. economy.
The U.S. central bank launched its controversial new policy on Wednesday, committing to buy about $75 billion in longer-term Treasury bonds per month. [ID:nN03287174]
The decision is aimed at further lowering borrowing costs for consumers and businesses still suffering in the aftermath of the worst recession since the Great Depression.
Right after the decision was released, the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE see-sawed, rallying, selling off and firming again.
It ended down 10.30 points, or 0.08 percent, at 12,671.12, more than 100 points higher than its low of the day at 12,569.44.
"The mystery was actually the early sell-off, which I think was some profit-taking and taking some risk off the table ahead of the announcement," Francis Campeau, broker at MF Global Canada, said referring to the pre-announcement market action.
"Now that the Street is satisfied with what the Fed said they're simply coming back into the market," he said of the subsequent rally.
Elvis Picardo, analyst and strategist at Global Securities in Vancouver, said "the knee-jerk reaction was that the Fed move would be positive for the markets," but at the same time markets had already priced in the news and that is why trade may have been choppy.
The materials sector, down 0.5 percent, was a key source of weakness on the TSX index as the price of gold dropped. [GOL/]
Barrick Gold ABX.TO was off 1 percent at C$48.68, while Goldcorp G.TO sank 1.1 percent to C$44.89.
Fertilizer companies remained in the spotlight with a crucial ruling from the Canadian government scheduled for after the market close on Wednesday on whether to allow BHP Billiton's $39 billion takeover bid for Potash Corp POT.TO to go ahead. Potash shares were largely flat, down 0.04 percent at C$146.21.
Agrium AGU.TO skidded 2.7 percent to C$85.59 after the farm products retailer reported quarterly results that missed market expectations. [ID:nN02163884]
($1=$1.01 Canadian) (Reporting by Jennifer Kwan; editing by Jeffrey Hodgson)