US STOCKS-Wall St flat, investors cautious ahead of Fed decision
* FOMC decision on stimulus efforts due at 2:00 p.m.
* FOMC expected to be cautious with cuts to bond purchases
* Indexes: Dow off 0.1 pct; S&P flat; Nasdaq 0.1 pct
NEW YORK, Sept 18 (Reuters) - U.S. stocks were little changed on Wednesday ahead of an announcement by the Federal Reserve on the future of its economic stimulus program.
Investors were hesitant to make big bets ahead of what is expected to be the first tentative step by the U.S. Federal Reserve to wean the economy off its massive stimulus program that has helped prop up the U.S. economy and equity markets for much of the year.
Expectations are that the Federal Open Market Committee (FOMC) will be cautious with cuts to its $85 billion in monthly asset buying when it announces its plans at 2:00 p.m. EDT (1800 GMT), while also seeking to reassure investors that an actual rise in interest rates is still distant. Fed Chairman Ben Bernanke holds a press conference at 2:30 p.m. (1830 GMT).
"The general consensus is a modest taper of $10 to $15 billion in purchases, mostly from treasuries at this point. Anything above this, we might see a knee jerk reaction, a selloff," said Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc.
"But if you see the kind of Fed speakers that are lined up this week, you can see that they will provide commentary throughout the week to alleviate any hiccups or fears that may be triggered by today's announcement."
In the equity options market, many traders appeared less worried by the U.S. Federal Reserve's expected announcement than by Washington's looming debt and budget battles. Hedges on volatility have been on the rise, but those bets do not look to be specifically tied to the Fed which has warned it will wind down its stimulus efforts if the economy is improving.
The Dow Jones industrial average was down 11.77 points, or 0.08 percent, at 15,517.96. The Standard & Poor's 500 Index was up 0.87 points, or 0.05 percent, at 1,705.63. The Nasdaq Composite Index was up 3.45 points, or 0.09 percent, at 3,749.15.
Activity in other asset classes also suggested that investors were not too worried about the Fed announcement. The U.S. dollar held near a four-week trough against a basket of major currencies while gold fell for the third consecutive session to a six-week low, as markets paused, expecting the U.S. Federal Reserve to announce a reduction, albeit small, in its bullion-friendly stimulus measures.
Economic data released showed U.S. housing starts rose less than expected in August amid a sharp slowdown in the multifamily sector, but a surge in permits for single-family homes pointed to sustained strengthening in the housing market recovery. Market reaction was muted.
Adobe Systems Inc, known for its Photoshop and Acrobat software, expects subscriber growth to top the 331,000 it added in the third quarter on strong demand from corporate customers. The stock jumped nearly 7 percent to $51.45.
FedEx Corp posted a bigger quarterly profit as the courier company cut costs and its lower-priced ground shipping business did well, sending its shares up 3.7 percent to $114.74.