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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