U.S. stocks erased gains (SPX) as the Federal Reserve refrained from taking new actions to boost the economy, disappointing investors who speculated the central bank would signal plans for a third round of quantitative easing.
The Standard & Poor’s 500 Index slipped 0.1 percent to 1,235.33 at 2:35 p.m. in New York after gaining as much as 1.1 percent earlier.
“The disappointment was due to a minority expecting QE3,” Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., said in a telephone interview. His firm oversees about $355 billion. “We don’t think that’s warranted. The economy is accelerating. If the economy collapses or the threat of deflation becomes more apparent, then the Fed may change its mind.”
Fed policy makers said the economy in the U.S. is maintaining its expansion even as the global economy slows. to lower borrowing costs.
“The economy has been expanding moderately, notwithstanding some apparent slowing in global growth,” the Federal Open Market Committee said in a statement at the conclusion of its meeting today in Washington. “While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated.”
Earlier gains in stocks were triggered as German investor confidence grew and Spain sold more debt than planned at an auction.
The S&P 500 has struggled to stay above its 2010 closing level of 1,257.64 since topping it during the last week of October after slumping below it for almost three months. The index has shown a year-to-date gain during 18 sessions since Oct. 27, only to later turn lower for 2011. It is currently down about 1 percent for the year, led by a 20 percent slide in financial shares.
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