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Stocks decline ahead of Fed meeting minutes

Ken Sweet, AP Markets Writer

In this Tuesday, Aug. 13, 2013 photo, trader John Santiago, left, and John Liotti work on the floor of the New York Stock Exchange. Wall Street appears headed for a lower opening Wednesday, Aug. 21, 2013, based on futures trading. (AP Photo/Richard Drew)

NEW YORK (AP) -- The stock market fell Wednesday as investors waited to hear from the Federal Reserve about what was next for its massive bond-buying program. More disappointing news from retailers also weighed on the market.

In late morning trading, the Dow Jones industrial average lost 55 points, or 0.4 percent, to 14,947, on pace to close below 15,000 for the first time since July 3.

The Standard & Poor's 500 index fell five points, or 0.3 percent, to 1,648. The Nasdaq composite edged down two points to 3,612.

The Federal Reserve will release minutes from its July monetary policy meeting at 2 p.m. Eastern Daylight Time. Fed Chairman Ben Bernanke said in mid-June that the central bank may begin to pull back on its bond-buying program, which has been in place in one form or another since late 2008 to keep interest rates low and encourage economic growth.

"Unless the Fed gives us great news, there's more to go with this correction that started two weeks ago," said Brian Reynolds, chief market strategist at Rosenblatt Securities.

Stocks have slumped since Aug. 2, when the Dow and S&P 500 closed at all-time highs. Traders have worried about weak earnings and are looking for clarity on how and when the Fed will wind down its bond purchases. The Dow has lost 4.6 percent since its record high.

Reynolds said he thinks the market is on track to close 10 percent below its recent peak, what's known on Wall Street as a correction.

Bond yields have risen dramatically the last few weeks as investors anticipate the end of the Fed's program. The yield on the U.S. 10-year Treasury note rose to 2.85 percent Wednesday, up from 2.81 percent the day before and 2.71 percent a week ago. The 10-year note is used as a benchmark to determine the yield on many types of loans, from individual mortgages to borrowing by large corporations.

"The market is being held hostage to all this talk about when the Fed is going to end its (bond-buying program)," said Tom di Galoma, co-head of fixed income rates trading at ED&F Man Capital. "If we can just get this out of the way, it will give the market a sense of relief."

Retail stocks were once again in focus, and not in a good way. Target, like many other retailers in the last two weeks, issued a muted sales outlook for the rest of the year. The stock dropped $1.63, or 2.3 percent, to $66.36.

American Eagle Outfitters plunged $1.46, or 9 percent, to $14.91 after reporting that it had to slash prices because shoppers are reluctant to spend. American Eagle is the latest teen-apparel retailer to report disappointing earnings or cut their outlook, following Urban Outfitters and others.

Staples sank $2.23, or 13.3 percent, to $14.60 after the office supplies chain reported earnings and sales that missed expectations of financial analysts. The company also slashed its full-year profit forecast.

One bright spot in retail was Home Depot competitor Lowe's, which was up more than 5 percent, making it the biggest gainer in the S&P 500. The home-improvement retail chain said it earned 88 cents per share in the period ending Aug. 2, ahead of financial analysts' expectations of 79 cents per share. The company also raised its full-year sales and profit forecasts, citing the improving outlook for the U.S. housing market.

In related news, the National Association of Realtors said Wednesday that existing home sales jumped to a seasonally-adjusted rate of 5.39 million in July from 5.06 million in June. Existing home sales are at highest level since November 2009.