By Saumya Vaishampayan
U.S. stocks opened mostly higher Wednesday ahead of a Federal
Reserve decision that is likely to end its latest bond-buying
program.
The Dow Jones Industrial Average rose 35 points, or 0.2%, to
17042 and the S&P 500 added four points, or 0.2%, to 1989.
The Nasdaq Composite fell four points, or 0.1%, to 4560.
Facebook Inc. shares fell 5.6%, weighing on the S&P 500 and
the Nasdaq. The social network said costs rose 41% in the third
quarter and finance chief David Wehner said he expects Facebook to
incur higher expenses than normal in the coming quarters because of
big investments.
Stocks rallied Tuesday, with the Dow gaining 1.1% to close at
17005.75. The Nasdaq rose 1.7% to 4564.29 and the S&P 500
advanced 1.2% to 1985.05.
Stocks have whipsawed since mid-September, when the Dow and the
S&P closed at all-time highs. Stocks subsequently tumbled,
hitting a low about a month later, amid fears of slowing global
growth. In the past two weeks, stocks have broadly recovered as
investors focused on U.S. corporate earnings, with Tuesday's gains
carrying the S&P 500 and the Nasdaq Composite into positive
territory for October, but still below levels seen in September.
The Dow is down 0.2% for October and off 1.6% from its Sept. 19
record, as of Tuesday's close.
The Fed will release its statement on monetary policy at 2 p.m.
EDT. The Fed's unprecedented monetary stimulus, which included
three rounds of bond-buying since the financial crisis, has been
credited in part with fueling stock-market gains in the period.
"We're getting closer to a point where [there isn't] unanimous
accommodation" from central banks around the world," said Eric
Wiegand, senior portfolio manager at the private client reserve at
U.S. Bank. "That's cast quite a bright spotlight on the language
and outcome of this meeting," he said.
Recent market volatility is likely to continue as Federal
Reserve officials now begin to debate when to raise short-term
interest rates, which have been near zero since December 2008, said
Steven Wieting, global chief investment strategist at Citi Private
Bank.
"Monetary policy just can't be as certain as it's been," he
said. "It just can't be as clear and supportive for easy financial
conditions across asset classes."
Fed officials have been winding down the bond-buying program all
year. At their September meeting, policy makers decided to
completely end those purchases after this month if the economy
continued to improve.
Ahead of the Wednesday statement on monetary policy, it is
expected that the Fed will end its bond-buying program. But recent
comments from Fed officials show that bond purchases, or
quantitative easing, will remain in the central bank's tool
kit.
The end of the bond-buying program sets up for an eventual
increase in interest rates, widely expected next year. Investors
will be parsing the Fed statement for guidance on when short-term
rates could rise.
"The initial move up in short rates is not likely to be a
disaster for the economy, and therefore not for equities," said Mr.
Wieting. That's because tightening monetary policy is usually
driven by strong economic growth. "But it does add to volatility,"
he said.
Gains in European stocks contributed to market's positive tone.
The Stoxx Europe 600 rose 0.5%, boosted in part by positive
earnings from Danish logistics company DSV AS.
In commodity markets, crude-oil futures rose 1.2% to $82.42 a
barrel. Crude-oil prices had tumbled this month, hitting a 2014
settlement low of $80.52 a barrel on Oct. 22, weighing on stocks of
energy companies.
"Figuring out where the bottom is in oil is key in the
marketplace," said Mr. Wieting of Citi Private Bank.
Gold futures fell 0.5% to 1223.60 an ounce.
The yield on the benchmark 10-year Treasury note rose to 2.309%
from 2.284% on Tuesday.
In corporate news, health insurer WellPoint Inc. raised its
outlook after reporting better-than-expected quarterly earnings.
Shares rose 2.4%
Hershey Co. reported a 5.8% increase in sales in the latest
quarter. But the company lowered its guidance for the year because
of lower-than-expected international sales amid macroeconomic
challenges. Shares fell 3.4%.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com