By Saumya Vaishampayan
U.S. stocks fell modestly Wednesday ahead of a Federal Reserve
decision that is likely to end its latest bond-buying program.
The Dow Jones Industrial Average fell 18 points, or 0.1%, to
16986, giving up earlier gains. The S&P 500 lost four points,
or 0.2%, to 1981.
The Nasdaq Composite declined 27 points, or 0.6%, to 4537.
Facebook Inc. shares fell 6.3%, weighing on the S&P 500 and
the Nasdaq. The social network's 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. 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.
Hank Herrmann, chief executive of Waddell & Reed, said he
doesn't expect major changes in the Fed statement. "At the moment,
[the Fed isn't] likely to stir the pot in any material way," he
said. "The Fed is very sensitive to doing or saying anything that
will disrupt the equity market."
While it is widely expected that the Fed will end its
bond-buying program, recent comments from Fed officials show that
bond purchases will remain in the central bank's tool kit. 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.
The end of the bond-buying program sets up for an eventual
increase in interest rates, widely expected sometime next year.
Investors will be parsing the Fed statement for guidance on when
short-term rates could rise. Those rates have been near zero since
December 2008.
Questions about interest rates top the list for clients at Croft
Leominster Inc., said Kent Croft, president of the company. "People
are starved for yield," he said. That has made stocks more
attractive, especially stocks of companies that pay dividends, he
said. "You're seeing equities pick up some of the slack," he
added.
Wednesday's trading action was muted ahead of the Fed statement,
said Darren Wolfberg, head of U.S. cash equity trading at BNP
Paribas. "There's a little bit of risk reduction going into the
Fed," he said.
In commodity markets, crude-oil futures rose 1.5% to $82.63 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.
The rise in crude on Wednesday helped lift the energy sector,
the biggest gainer on the S&P 500.
Gold futures fell 0.5% to 1223.20 an ounce.
In Europe, the Stoxx Europe 600 gained 0.2%, boosted in part by
positive earnings from Danish logistics company DSV AS.
Demand for safe-haven government debt declined, pushing the
yield on the benchmark 10-year Treasury note up to 2.319% 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%
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 3.1%.
Goodyear Tire & Rubber Co. posted higher-than-expected
profit in the third quarter. Shares rose 6.8%.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com