By Anora Mahmudova, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks drifted in and out of positive territory Wednesday as investors awaited the Federal Reserve's decision on the fate of the bond-buying stimulus program due at 2 p.m. Eastern.

The S&P 500 index (SPX) fell 2 points, or 0.1% to 1,779.79. Nasdaq Composite (RIXF) shed 18 points to 4,004.68. Dow Jones Industrial Average (DJI) was still in the green but gave up earlier gains to trade 20 points or 0.1% higher at 15,896.63.

At 2 p.m. Eastern, the Federal Open Market Committee is set to release a statement on its policy decision, to be followed at 2:30 p.m. by a news conference with Fed Chairman Ben Bernanke. A survey of fund managers by Bank of America Merrill Lynch released on Tuesday revealed that only 11% of those polled expect a taper on Wednesday, while the majority see a move in March.

In economic news, housing starts data showed that Americans built more new homes than expected in November, shrugging off rising mortgage rates. The pace at which new homes were built soared to a seasonally adjusted annual rate of 1.09 million, the highest rate since February 2008, with surges for single-family homes and apartments, the government reported Wednesday.

Better-than-expected housing data sent the S&P 500 home builders index up 2%, as Lennar Corp. (LEN), D.R. Horton, Inc (DHI) and PulteGroup, Inc (PHM) are among the best-performing stocks on Wednesday.

"Today's housing figures provide another data point for the Fed to decide on the taper. Along with employment figures, the economy is certainly in a much better shape than it was in September when the Fed decided not to start the tapering," said Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors.

"Markets had seven months to react to the eventual tapering and any volatility after the decision will be short-lived, because tapering ultimately means that the economy is improving," he added.

The stocks closed lower on Tuesday, after main indexes failed to break into positive territory. Tuesday's loss on the benchmark S&P 500 index was the fifth in the past six sessions.

* Comment: Terry Sandven, chief investment strategist at U.S. Bank Wealth Management thinks markets will focus more the Fed's statement than the actual decision. "Most likely the Fed will wait until January when it will have more data to evaluate the health of the recovery, but it will remain accommodative. If it decides to start the tapering in December, we will see a pullback, as markets do not like changes that bring uncertainty, but we think it will be reasonably short-lived. Markets know that quantitative easing cannot continue indefinitely and if the Fed decides to slow the asset purchases, it means that the Fed is confident that the economy will grow sustainably without constant liquidity from the central bank."

* The economy: Pimco's Mohamed El-Erian put the odds of a taper being rolled out Wednesday at up to 60%, writes Shawn Langlois in the Need to Know column. However, most analysts, as well as MarketWatch voters, believe that March is more likely the time we'll see the spigot tighten.

* Today's movers & shakers: Lennar Corp. shares rose 3% after fiscal fourth-quarter profits and revenues beat estimates. Shares of Jabil Circuit, Inc fell 20% after earnings and outlook fell short of Wall Street's expectations. Ford Motor Co shares slid 5% as the car maker lowered its 2014 outlook. FedEx Corp shares fell 0.8% after earnings missed expectations. General Mills, Inc dropped 2.3% as second-quarter earnings disappointed. AMC gained 9.2% on the day after debuting on the New York Stock Exchange Wednesday morning. The initial public offering priced shares of the movie theater company at $18 a piece. Read more in the Movers & Shakers column.

* Other markets: Gold records modest gains ahead of the Fed announcement and crude oil futures moved higher after a drop in crude U.S. inventories. Stocks in Asia were mostly up led by gains in Japan and the European stocks are broadly higher.

More stories on MarketWatch:

Ford lowers profit outlook for North America

Poll: When do you expect the Fed to taper its bond-buying program

Even Wall Street's bears see stock rally next year

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