* ECB cuts key rates, expands asset-buying plan
* Dollar General up after results
* Brent crude oil down more than 2 pct
* Indexes down: Dow 0.19 pct, S&P 0.07 pct, Nasdaq 0.27 pct (Updates to afternoon)
By Laila Kearney
March 10 (Reuters) - The S&P 500 traded flat in a volatile session on Thursday after the European Central Bank reduced interest rates but ECB chief Mario Draghi disappointed investors expecting multiple rate cuts by saying more were unlikely.
Stocks jumped early in the day after the ECB pushed its deposit rate deeper into negative territory and increased its asset-buying program to 80 billion euros a month from 60 billion euros in an effort to boost growth in the region.
"The world was really, really happy with this mainly because we're all addicted to zero interest rates," said Kim Forrest, research analyst at Fort Pitt Capital Group in Pittsburgh. "It's free money."
When Draghi said future cuts would only happen under extreme circumstances, investors expecting even lower rates switched their strategy to risk off, Forrest said.
At the same time, other investors feared lower interest rates in Europe would harm U.S. banks and negatively impact exports by leading to euro devaluation, dragging the market down further, she said.
"We're torn between fear and greed and it all happens on the same day," said Forrest.
Crude oil prices, the stock market's other major driver, fell after Reuters reported that a proposed meeting between major oil producers to discuss an output cut was unlikely to take place without Iran's participation. Brent crude was off more than 2 percent.
The Dow Jones industrial average fell 32.18 points, or 0.19 percent, to 16,968.18, the S&P 500 lost 1.46 points, or 0.07 percent, to 1,987.8 and the Nasdaq Composite dropped 12.83 points, or 0.27 percent, to 4,661.55.
U.S. jobless claims fell more than expected to their lowest levels since October, pointing to sustained strength in the labor market that should further dispel fears of a recession.
The U.S. Federal Reserve has said it is on track to raise interest rates gradually this year, but its decision remains data-dependent. The Fed is to meet on March 15-16.
Shares of Dollar General were up 9.8 percent at $82.60 after it reported better-than-expected same-store sales growth. Rival Dollar Tree was up 4.5 percent.
Declining issues outnumbered advancing ones on the NYSE by a 1.49-to-1 ratio and on the Nasdaq, 1,790 issues fell and 978 advanced.
The S&P 500 posted 30 new 52-week highs and 2 new lows; the Nasdaq recorded 52 new highs and 60 new lows. (Reporting by Laila Kearney; Editing by Dan Grebler)