Stocks slip awaiting Fed

Associated Press photo by RICHARD DREW -- Specialist William Geier, left, works on the floor of the New York Stock Exchange on Monday. Investors turned their attention Tuesday to the Federal Reserve's two-day meeting and whether any changes might be in store for the Fed's stimulus efforts. Show caption
Associated Press photo by RICHARD DREW -- Specialist William Geier, left, works on the floor of the New York Stock Exchange on Monday. Investors turned their attention Tuesday to the Federal Reserve's two-day meeting and whether any changes might be in store for the Fed's stimulus efforts.

2-day meeting to decide on tapering of stimulus

Nobody wanted to stick his neck out on Tuesday.

The stock market edged slightly lower as the Federal Reserve started a two-day policy meeting that may herald the beginning of the end for its economic stimulus.

Few expect that the Fed will announce that it plans to pare back, or ‘taper,’ its huge bond-buying program after its meeting wraps up on Wednesday. However, good news on the U.S. economy this month, including a blockbuster jobs report, and a budget deal in Washington appeared to have increased the likelihood of a change.

“It’s just the taper drama, that’s really all the market seems focused on,” said Dean Junkans, CIO for Wells Fargo Private Bank. “The chances of them doing something tomorrow are higher than they were a month ago.”

Major stock indices fell, but just slightly. The Standard & Poor’s 500 index eased five points, or 0.3 percent, to 1,781. The Dow Jones industrial average crept down nine points, or 0.1 percent, to 15,875.26. The Nasdaq composite edged lower by five points, or 0.1 percent, to 4,023. 68.

Eight of the 10 industrial groups in the S&P 500 declined, led by phone companies. Materials stocks and technology companies edged higher.

A couple of big companies bucked the downward trend after pledging to hand more cash to stock holders.

Boeing rose $1.16, or 1 percent, to $135.88 after the plane maker increased its stock buyback program by $10 billion and raised its dividend 52 percent. 3M climbed $3.73, or 3 percent, to $131.39 after raising its dividend by 35 percent. The company also forecast solid earnings next year.

Stocks have surged this year as the Fed kept buying $85 billion in bonds every month to hold down long-term interest rates.

As well as boosting the economy, that stimulus has made stocks a more attractive investment compared to bonds.

The only setbacks for the market this year have come when investors were nervous that the Fed was about to cut back its stimulus.

Instead of worrying about the market’s immediate reaction to the Fed’s announcement on Wednesday, investors should focus on the positive backdrop for stocks, said Liz Ann Sonders, chief investment strategist at Charles Schwab.

The economy is improving, companies are investing more, and earnings are forecast to grow at a steady rate, ensuring there will be demand for stocks.

“Dips that we get are not going to be terribly severe,” Sonders said.

Among other trends in the market:

FRONTIER COMMUNICATIONS: It rose the most in the S&P 500. The stock jumped 47 cents, or 8.6 percent, to $4.78 after it reached a deal to acquire AT&T’s fixed-line business in Connecticut for about $2 billion.

DELTA AIR LINES: It fell the most in the S&P 500, dropping 98 cents, or 3.5 percent, to $26.94.

PFIZER: It has reached a settlement with Teva Pharmaceuticals that allows the generic drugmaker to launch a copycat version of its popular erectile dysfunction drug Viagra in 2017.

EUROPE CAR SALES: The European car market is slowly mounting a rebound, with new car registrations up for the third month in a row. The European carmakers’ association reports that EU passenger car sales were up 1.2 percent in November over last year.

MICROSOFT: It expects to finish its search for CEO Steve Ballmer’s replacement by early next year, board director John Thompson said in a blog post.

SPRINT-DISH: Sprint and Dish Network are collaborating on a wireless broadband service targeting underserved areas.