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Investors on edge before Fed meeting

June 19, 2013|By Andrew Tangel
  • At the end of its two-day meeting, the Federal Reserve will release a statement Wednesday, followed by a news conference by Chairman Ben S. Bernanke. Few expect the Fed to announce any immediate changes to interest rates or its stimulus. Above, traders work on the floor of the New York Stock Exchange on Tuesday.
At the end of its two-day meeting, the Federal Reserve will release a statement… (Spencer Platt / Getty Images )

NEW YORK -- The stock market could get a bit jumpy.

Investors have been eagerly awaiting clearer signals from the Federal Reserve over when it will wind down its massive stimulus programs, known as quantitative easing.

At the end of its two-day meeting, the central bank will release a statement Wednesday, followed by a news conference by Chairman Ben S. Bernanke. Few expect the Fed to announce any immediate changes to interest rates or its stimulus.

U.S. markets may initially react to trading overseas early Wednesday, said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.

“The market's just going to be on edge and just sitting there quietly” until the Fed releases its statement, Frederick said.

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Investors will be trying to divine when the Fed will begin scaling back its $85-billion-a-month purchases of bonds that have pushed interest rates to record lows.

Will it come this summer? This fall? Next year?

The monetary stimulus has made borrowing cheaper and also made riskier investments like stocks more attractive. The Fed has signaled it would ease its bond-buying spree once inflation and employment hit certain thresholds.

After a series of mixed signals, reporters will try to pin down Bernanke on the Fed's plans.

Eric Hunsader, founder of the market research firm Nanex, said a large number of buyers and sellers pull out of the stock market leading up to Bernanke's news conferences.

"Every word he utters," Hunsader said, "throws a wrench into the market for a good few hours."

Investors are wary of not being able to cancel their orders fast enough before the market can digest the news, he said.

"People just pull their orders out and wait until they get the information and then they tiptoe back in," Hunsader said.

Investors seemed optimistic ahead of Wednesday's Fed announcement. The Dow Jones industrial average rose 138.38 points, or 0.91%, to 15,318.23 on Tuesday.

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