The broad indices ended mixed as investors looked ahead to the two-day meeting of the Federal Open Market Committee, which begins Tuesday. The FOMC will release its statement on Federal Reserve policy Wednesday afternoon. Following the previous FOMC meeting in September, the committee surprised many economists and investors by deciding to make no change in the central bank's "QE3" stimulus policy, which includes net month purchases of $85 billion in long-term bonds.
The bond purchases have continued since last September. Following the partial shutdown of the federal government during the first half of October and in light of conflicting economic reports, most economists now expect the Fed to wait until 2014 to begin tapering bond the bond purchases that are meant to hold-down long-term interest rates.
Last week the Department of Labor said that the U.S. unemployment rate improved slightly to 7.2% in September from 7.3% in August. "[T]he ongoing decline in the unemployment rate against the backdrop of moderate 2% real GDP growth is consistent with our longstanding view that potential real GDP growth has meaningfully downshifted," Deutsche Bank's equity research team wrote in a client note Monday, underscoring the likelihood of the FOMC standing pat again.One disappointing economic report on Monday added to the likelihood of the Fed making no change this month. The National Association of Realtors said its pending home sales index fell by 5.6% in September to a reading of 101.6, from a downwardly revised 107.6 the previous month. Economists polled by Thomson Reuters on average expected the index to decline by 2% in September. The index was also down 1.2% from a year earlier. Also on Monday, The Federal Reserve reported that U.S. industrial production rose by 0.6% during September, followed by an increase of 0.4% in August. The figure for September came in above the consensus forecast of another 0.4% increase. The main piece of banking industry news was the announcement by the Federal Housing Finance Agency late on Friday of $5.1 billion in settlements between JPMorgan Chase, Fannie Mae and Freddie Mac. The FHFA, which regulates the two government sponsored enterprises had sued JPMorgan over losses on private label mortgage-backed securities purchased from the bank, as well as Bear Stearns and Washington Mutual.
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