An October rate hike isn't likely, but the possibility of a December increase is keeping markets on edge.

Trading was choppy Monday as investors hoped the Federal Reserve might clarify its rate outlook when it issues its latest policy statement Wednesday afternoon. 

Stocks bounced from losses to gains in narrow-range trading. The S&P 500 finished down 0.2%, the Dow Jones Industrial Average fell 0.15%, and the Nasdaq added 0.06%.

The chances of a hike from near-zero rates are slim after the labor market weakened in October and inflation remained soft. The likelihood of a hike on Wednesday is currently at 6%, according to Fed funds futures. 

Still, ambiguity over the exact timing of liftoff after October has made for volatile trading ever since the Fed decided to leave rates unchanged at its September meeting. 

"Muddled communications from the Fed, ambiguity among investors and increased levels of volatility in the capital markets," was how Joseph Quinlan, chief market strategist for U.S. Trust, described the market's mood. "While the Fed continues to insist that it wants to raise rates before the end of the year, investors aren't buying it, potentially putting the Yellen Fed on a collision course with the markets."

December might not be certain, but the Fed's repeated insistence on data dependence is. With nearly three months of data still to pore over, any commitment to a timeline won't likely be forthcoming.

"While admittedly it seems unlikely that economic prospects will improve dramatically between now and the December meeting, it's also unlikely the Fed will prematurely eliminate a move so far in advance," CRT Capital analysts wrote in a note. 

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Fed funds futures are currently pricing in a one-in-three chance of a rate hike by the end of the year. The Fed will convene on Tuesday with an announcement scheduled for Wednesday afternoon.

Data on the housing market confused matters on Monday after a rare spot of weakness in September. New home sales fell 11.5%, their lowest rate in 10 months, driven by weakness in the Northeast.

On the upside, after four weeks of gains, the S&P 500 is within striking distance of its record high. The benchmark index is just under 3% from its all-time closing high of 2,130 set in May. 

In earnings news, Xerox (XRX) - Get Xerox Holdings Corporation (XRX) Report  fell after committing to a "comprehensive review of structural options." Revenue fell 7.3% to $4.45 billion, driven by an 11% decline in equipment sales and 12% fall in revenue of document technology, such as copiers and scanners.

Auto stocks took focus after General Motors (GM) - Get General Motors Company (GM) Report reached a tentative deal with the United Auto Workers union to avoid a strike. Local union leaders will vote on the four-year contract on Wednesday. The agreement covers 52,600 U.S. auto workers at 62 of the automaker's facilities.

Tesla (TSLA) - Get Tesla Inc Report climbed nearly 3% after reporting its strongest quarterly results in China over the three months ended September. The automaker sold 1,345 units in the region over the quarter. CEO Elon Musk recently said that sales in China could match the U.S. in as few as five years.

Toyota (TM) - Get Toyota Motor Corp. Sponsored ADR Report outpaced all other car companies to sell the most units over the first nine months of the year. The Japanese automaker sold 7.49 million models over the period, better than Volkswagen's (VLKAY) 7.43 million and General Motors' 7.2 million.

In deals news, Pep Boys (PBY) - Get Prospect Capital Corporation 6.25 % Notes 2018-15.06.28 Report rocketed more than 23% higher after agreeing to be acquired by Bridgestone for $835 million. The all-cash deal represents a 23% premium to Pep Boys' closing price on Friday.

Duke Energy (DUK) - Get Duke Energy Corporation (DUK) Report shares fell after the company agreed to acquire Piedmont Natural Gas (PNY) for $4.9 billion, approximately a 40% premium to Piedmont's closing price on Friday. The all-cash deal will see Duke assume around $1.8 billion of Piedmont's existing debt. The deal is expected to close by the end of 2016.