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Stocks edge lower as investors wait on Fed

Steve Rothwell, AP Markets Writer

Trader James Denaro works on the floor of the New York Stock Exchange Tuesday, June 11, 2013. Global stock markets were mostly lower Wednesday June 19, 2013 as investors waited for an update on the U.S. economy from the Federal Reserve. (AP Photo/Richard Drew)

NEW YORK (AP) -- The stock market is waiting on the Fed.

Major indexes drifted lower in midday trading Wednesday as traders wondered what the Federal Reserve will say about the U.S. economy and the central bank's huge stimulus program this afternoon.

The U.S. central bank will release its latest policy update at 2 p.m. Eastern Daylight Time and Bernanke will speak at a press conference thirty minutes later. Comments by Bernanke last month suggesting the central bank may soon ease that support unsettled investors and caused this year's rally in stocks to stall.

"All eyes are on Bernanke and markets are being held hostage until he speaks," said Joseph Tanious, Global Market Strategist at J.P. Morgan Funds.

The Fed has been buying $85 billion of bonds a month to support an economy that is still struggling to grow faster following the Great Recession.

The Dow Jones industrial average fell 19 points, or 0.1 percent, to 15,298 as of 12 p.m. Eastern Daylight time.

The Standard & Poor's 500 index dropped two points, or 0.1 percent, to 1,650. Six of the 10 industry groups in the index fell. Telecommunications stocks fell the most, 0.9 percent.

Bernanke is unlikely to give investors any greater clarity as to when the Fed will start to pull back on its stimulus, Tanious said. Instead, he expects the Fed chairman to reaffirm the bank's view that the U.S. economy is slowly improving and that it will consider reducing the stimulus at some point this year.

While stocks may decline in the short term after Wednesday's announcement, they should revive over coming months as investors start to focus on the outlook for the economy and company earnings.

"Once we get past Bernanke's testimony today, and once we're past the knee-jerk reaction, whatever it may be, I suspect the markets (to) head higher," said Tanious.

The stock market started the week on a strong note. The Dow rose more than 100 points both Monday and Tuesday. While reports of increased home building and low inflation propelled some of the gains, some investors said the buying was driven by expectations that Bernanke would ease investor concerns that the Fed is poised to turn off its stimulus.

"If you look at how the market has reacted in the last two days, there is an expectation that it will be a somewhat calming message coming out of the Fed," said Maury Fertig, Chief Investment Officer at the investment adviser Relative Value Partners.

The yield on the 10-year Treasury note rose to 2.21 percent from at 2.19 percent late Tuesday.

In commodities trading, the price of crude oil fell 10 cents, or 0.1 percent, to $98.56 a barrel. The price of gold rose $5.90, or 0.4 percent, to $1,372.80 an ounce. The dollar edged lower against the euro and the Japanese yen.

In other U.S. stock trading, the Nasdaq composite fell two points, less than 0.1 percent, to 3,479.

Among stocks making big moves:

— Sprint Nextel fell 20 cents, or 2.9 percent, to $7.11 after satellite TV operator Dish Network said late Tuesday that it wouldn't submit a revised bid for the wireless carrier.

— Adobe jumped $2.83, or 6.5 percent, to $46.19 after the software maker said that its Creative Cloud subscriptions continued to climb in its fiscal second quarter.

— FedEx gained $3.36, or 3.4 percent, to $102.80 after the company posted earnings that beat the expectations of Wall Street analysts.

— Men's Wearhouse fell 87 cents, or 2.3 percent, to $36.60 after the company dismissed its founder and executive chairman George Zimmer. The company also delayed its annual shareholders' meeting, which had been scheduled for Wednesday.