Dow ventures into positive territory

US stocks recovered their losses late in the session today, with the major benchmarks largely unchanged a day before the Fed is due to announce its latest decision on monetary policy.

The financial markets are moving with restraint today, with caution over a possible taper in the Fed’s stimulus tomorrow helping to curb any significant price moves.

With under half an hour to the close on Wall Street, the Dow was up 0.06% or 9 points at 15,893, after having clawed back all its losses, while the S&P 500 still remained in the red, down 0.23% at 1782.5. The Dow was led by a gain of nearly 3% in 3M, after the company announced a 35% increase in the size of its dividend.

The Fed has long said that its decision on whether to reduce its stimulus will hinge upon the incoming data. There can be little doubt that the latest economic reports have been painting a fairly clear picture of improvements in the US economy, but there is question mark over whether the Fed has seen enough evidence that the improvements will be sustained if they ease their foot off the accelerator.

My inclination is that they will hold off from a taper and wait for further evidence of growth in the economy, and this would also allow them room to see if inflation starts to pick up. That said, a taper seems a far more distinct possibility now than it did just a fortnight ago.

Apart from the big event of the FOMC decision and the ensuing press conference with Fed Chairman Ben Bernanke, we also have November housing starts tomorrow.

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