Stocks got a lift early after Germany’s constitutional court approved the new Eurozone rescue fund, which will allow the European Central Bank to buy sovereign bonds in an effort to reduce crippling borrowing costs faced by Spain and Italy.
But the gains faded as investors shifted their attention to the Fed, which concludes a two-day meeting today. Equities have rallied on expectations of more Fed action to keep interest rates low, leading some analysts to warn of disappointment.
Economists put the odds of a third round of bond buying from the Fed at 65 per cent, up from 60 per cent in August, according to a Reuters poll.
“The market is somewhat nervous ahead of tomorrow’s Fed decision, and rightfully so,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York, who believes the Fed will not begin another round of stimulus until after November’s presidential election. “We could be setting ourselves up here for a quick 2 to 4 per cent correction.”
The Dow Jones industrial average closed up 9.99 points, or 0.07 per cent, to 13,333.35. The Standard & Poor’s 500 Index ended up 3.00 points, or 0.21 per cent, to 1,436.56. The Nasdaq Composite Index gained 9.79 points, or 0.32 per cent, to 3,114.31.
Apple shares were up 1.39 per cent to $669.79 after it unveiled its iPhone 5. The introduction of the new iPhone comes as Apple tries to fend off competition. Facebook jumped 7.7 per cent to $20.93 after chief executive Mark Zuckerberg hinted at new growth areas from mobile.