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U.S. Stocks Are Little Changed Before Fed Policy Decision

U.S. stocks were little changed, following a three-day gain for the Standard & Poor’s 500 Index, as investors awaited the latest monetary-policy decision from the Federal Reserve.

The S&P 500 added less than 0.1 percent to 1,942.54 at 9:31 a.m. in New York.

“I would be shocked or alarmed if we get any surprising news out of the decision today,” Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp., said by phone. The firm oversees about $2.4 trillion in client assets. “The chances of an interest rate raise are virtually zero and I would be surprised to see a change in the course of tapering. We haven’t had a deterioration of economic data. If anything, we’ve seen better data than in February and March.”

Fed officials led by Janet Yellen will release a new set of quarterly predictions for unemployment, inflation, economic growth and the benchmark federal funds rate today. In March, policy makers estimated that the interest rate, now close to zero, would rise to 1 percent at the end of 2015 and to 2.25 percent a year later.

U.S. interest rates will climb faster than money-market investors expect, economists surveyed by Bloomberg News June 12-16 predicted. A report yesterday showed inflation quickened in May by the most in more than a year.

“A big theme right now is speculation about interest rates,” said Andreas Lipkow, a senior market strategist at Kliegel & Hafner AG in Berlin. “There may be a difference between the market’s expectations and what Fed officials will do. My guess is that the Fed could be more hawkish than the market is thinking. We could see some volatility.”

Bond Purchases

The Federal Open Market Committee will reduce its monthly asset purchases by $10 billion to $35 billion when it announces the outcome of its meeting at 2 p.m. in Washington, according to the median estimate compiled by Bloomberg. Some 62 percent of economists surveyed by Bloomberg News forecast that the Fed will agree to stop bond purchases at the October meeting.

The stimulus has helped propel the S&P 500 (SPX) higher by as much as 188 percent from its bear-market low in March 2009.

The S&P 500 has climbed 7 percent since a low on April 11, closing at a record on June 9, as data showed the economy is recovering from the impact of extreme weather earlier this year. The gauge dropped 0.7 percent last week as violence in Iraq sent the price of Brent crude to the highest level in 11 months.

The benchmark index is trading at 16.4 times the projected earnings of its members, up from 15.5 times at the beginning of the year.