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Stocks little changed, despite Fed report

An American flag and Wall Street sign outside

An American flag and Wall Street sign outside the New York Stock Exchange in Manhattan on July 15, 2013. Credit: AP / Mark Lennihan

U.S. stocks were little changed as the market closed Wednesday, despite data showing better-than-forecast economic growth and the Federal Reserve's decision to keep trimming asset purchases.

At the close on Wall Street, the Standard & Poor's 500 index was up less than a point at 1,970.1. The Dow Jones industrial average had lost 31.8 points, about 0.2 percent, to 16,880.4, and the Nasdaq composite held on with a gain of 20.2 points, about 0.5 percent, to 4,463.

"The GDP print this morning had given the market some pause as to how hawkish the Fed might be," said Stacey Nutt, chief investment officer at ClariVest Asset Management LLC in San Diego, California. His firm oversees about $4 billion. "Now it seems like they were not as hawkish as feared."

The Commerce Department report Wednesday showed gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed's view that a first-quarter contraction was transitory. Consumers, whose spending accounts for 70 percent of the economy, have grown more confident as the labor market improves and rising share prices boost wealth.

Policymakers tapered monthly bond buying to $25 billion in their sixth consecutive $10-billion cut, staying on pace to end the purchase program in October. Fed officials led by chairwoman Janet Yellen are stepping up a debate over when to raise interest rates for the first time since 2006 as unemployment falls faster than expected and inflation picks up.

"Inflation has moved somewhat closer to the committee's longer-run objective," the Fed said. Its preferred inflation gauge -- the personal consumption expenditure price index -- rose 1.8 percent in May from a year earlier. Its 12-month gain was as low as 0.8 percent in February.

Equity markets will see a decline at some point after surging for the past several years, according to former Federal Reserve chairman Alan Greenspan. "The stock market has recovered so sharply for so long, you have to assume somewhere along the line we will get a significant correction," Greenspan, 88, said Wednesday in an interview on Bloomberg Television's "In the Loop" with Betty Liu. "Where that is, I do not know."

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