US STOCKS-Wall St drifts lower as Fed decision looms
* FOMC statement due at 2 p.m. (1800 GMT
* Fed expected to be cautious with cuts to bond purchases
* FedEx shares rise after results
* Indexes off: Dow 0.4 pct; S&P 0.2 pct; Nasdaq 0.2 pct
NEW YORK, Sept 18 (Reuters) - U.S. stocks dipped on Wednesday ahead of an announcement by the Federal Reserve on the future of an economic stimulus program that has been a main reason for Wall Street to hit record highs.
Investors were hesitant to make big bets ahead of what is expected to be the first step by the Fed to take the economy off its massive quantitative easing stimulus program.
Bets are that the Federal Open Market Committee will be cautious with cuts to its $85 billion in monthly asset buying when it announces its plans at 2 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).
"We expect the consensus expectations to be met by the Fed," said Jim Russell, senior equity strategist for U.S. Bank Wealth Management in Cincinnati.
"The market would be surprised if there's not a $10-to-$20 billion decline in monthly purchases announced today."
The Fed will also publish its fresh economic forecasts, and is expected to slow its growth predictions as well as lower its range for the unemployment rate.
"We think the Fed's view of the domestic economy is very important, it matters very much what they think despite perhaps their accuracy has been off a bit," said Russell.
Betting on S&P 500 Index options suggests the market doesn't see more volatility coming this week, even though the size of the reduction of the Fed program could be crucial to how it is received in the markets.
The Dow Jones industrial average fell 55.35 points or 0.36 percent, to 15,474.38, the S&P 500 lost 4 points or 0.23 percent, to 1,700.76 and the Nasdaq Composite dropped 7.137 points or 0.19 percent, to 3,738.561.
Volatility is expected after the statement, as has been the case during recent Fed meeting days.
Looking beyond the Fed, market participants had an eye on the looming budget and debt limit debate in Washington. The White House said Wednesday the latest Republican proposal moves away from compromise.
Economic data 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, 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 7.6 percent to $51.81 after hitting a record high of $52.08.
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 2.7 percent to $113.71. It earlier hit $115.50, its highest level since July 2007.
Apple shares rose 1.5 percent to $462.23. The fingerprint reader on its top-end iPhone 5S received an early thumbs up for ease of use from two influential reviewers, helping dispel concerns about the scanning technology which has been notoriously unreliable in other phones.