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NEW YORK (CNNMoney)
The Fed is wrapping up its final policy meeting of the year and investors are split over whether the central bank will announce plans to scale back, or taper, its $85 billion per day bond buying program.
The Dow Jones industrial average and the S&P 500 were both little changed in midday trading. The Nasdaq was dragged lower by shares of electronic manufacturing service provider Jabil Circuit (JBL, Fortune 500), which fell 20% after announcing plans to sell its warranty repair business.
The bond market was in retreat, with the yield on the 10-year note rising to 2.89%.
This could be a very volatile day for the markets as investors wait for the Fed's announcement at 2 p.m. ET and press conference featuring Fed chair Ben Bernanke at 2:30.
The Fed has been buying bonds since 2008 and many investors say the liquidity boost has been the main driver of the bull market in stocks since 2009.
But as the economy improves, the Fed has been preparing the market for a gradual reduction in the program, known as quantitative easing. Bernanke sent shock waves through global markets in May when he first raised the prospect of tapering.
There's little consensus on when the Fed will begin tapering, although most agree that it will happen sooner rather than later. Some are expecting the rollback to begin this year, while others are convinced it will be pushed out to 2014.
Pimco chief executive Mohamed El-Erian told Bloomberg TV on Tuesday that there's a 60% chance the Fed will announce tapering Wednesday. But others say the Fed will wait until after Bernanke's term ends next year and that it will be up to Bernanke's successor, current Fed vice chair Janet Yellen, to announce any major change in policy.
Related: Don't sell your winners! Ride the momentum
In any event, investors have had plenty of time to get used to the idea and some believe the market is well prepared for tapering.
David Lutz, a market strategist at Stifel Nicolaus, said stocks could move higher after the Fed meeting in a classic "buy the news" move. "I continue to argue that this is the most telegraphed move in the Fed's history, so most positioning is already built in," he said.
In economic news, the number of new homes breaking ground soared nearly 23% in November from the month prior, the Commerce Department said. But applications for building permits, a leading indicator for new home construction, fell 3% in the month.
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Ford breaks down. Ford (F, Fortune 500) shares plunged nearly 7% after the automaker said it expects profits in North America to be lower next year as it rolls out new models in the United States. General Motors (GM, Fortune 500) and Tesla (TSLA) shares were also lower.
At least one trader was surprised to see electric car maker Tesla following its mostly gas-powered rivals lower.
"$TSLA Ironically following $F & $GM. Common sense will be back shortly with this one," said StockTwits user CJK1.
Other traders argue that the selling, which pushed Ford shares below $16 for the first time since August, was overdone.
"$F WOW talk about an overreaction," said StarPower. "Will get back to 17 no problem, just might take some time, IMO."
The retreat is a buying opportunity just in time for the holidays, according to another trader.
"$F Ford is a GIFT at this price!," said TJMeneo75
Not everyone is buying it, though. Some traders are bracing for more downside in Ford stock.
"$F get out..." said afernandez321.
What's moving. Gogo (GOGO) shares sank after the lock-up period for certain holders of the stock expired. Company insiders and underwriters were prohibited from selling shares for 180 days after the in-flight Internet provider went public on June 20.
Shares of movie theater chain AMC (AMC) rose nearly 9% after the company raised $331 million from its initial public offering late Tuesday.
General Mills (GIS, Fortune 500) shares were slightly lower after reporting earnings that missed forecasts, and FedEx (FDX, Fortune 500) shares also dipped after delivering an earnings update. Oracle (ORCL, Fortune 500) is set to report results after the market close.
Related: Why is saving money so hard?
Shares of social media companies were under pressure. LinkedIn (LNKD) was hit particularly hard, while Facebook (FB, Fortune 500) and Twitter (TWTR) suffered more minor losses. The Global X social media index (SOCL), which tracks a basket of social media companies, was down more than 1%. There was no obvious reason for the pullback, but social media stocks have had a strong year. The ETF is up more than 50% since January.
In world markets, European stocks posted gains. Asian markets ended mixed.
First Published: December 18, 2013: 9:47 AM ET
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