U.S. stocks closed marginally higher on Tuesday on the heels of disappointing housing data, while investors awaited the latest monetary policy decisions from the Federal Reserve and the Bank of Japan.
"You're dealing with three issues," said Rob Bartenstein, CEO of Kestra Private Wealth Services, referring to seasonality, valuations and the Fed. "You've got everybody waiting to see what the Fed is going to do, which I think is nothing."
"We're not hyper-valued, but we're in one of the top four most-valued bull markets of all time," he said. "Valuation alone won't bring down the market, but if we get something unexpected, valuations are going to be under a microscope."
The Dow Jones industrial average rose more than 100 points shortly after the open before closing about 10 points higher, with McDonald's contributing the most gains. The S&P 500 rose less than 0.1 percent after briefly turning negative, with health care leading. The Nasdaq composite advanced 0.1 percent, as the iShares Nasdaq Biotechnology ETF (IBB) rose 1.43 percent.
"I think [the market] is basically treading water ... in advance of what the Fed is going to do," said Tom Siomades, head of Hartford Funds Investment Consulting Group. "I think some of the bond movements we're seeing were in anticipation of what the Fed might say." He added that he does not think the Fed will raise interest rates on Wednesday.
Housing starts in the U.S. came in at an annualized rate of 1.14 million in August, well below the expected 1.19 million. Construction permits fell 0.4 percent to a 1.14 million-unit rate last month.
"It was a bit of a disappointment, but it wasn't detrimental to the housing market," said Peter Cardillo, chief market economist at First Standard Financial. "If you look at the report as a whole, it doesn't point to any trouble."
Housing starts and permits were two of the last data sets released as the Fed began its two-day policy meeting on Tuesday. Market expectations that the Fed will raise interest rates on Wednesday were low. Lindsey Piegza, chief economist at Stifel Fixed Income, said Monday the odds of a rate hike this month are "well under 20 percent," in her view.