S&P 500 erases losses as Fed minutes show support for stimulus

Stock prices were mixed again on Wednesday as investors pause in anticipation of new stimulative action by the Federal Reserve.

The Dow Jones Industrial Average fell 30.82 points to 13,172.76. However, the Nasdaq Composite Index gained 6.41 points to 3,073.67, and the S&P 500 Stock Index posted a fractional gain at 1,413.49.

The Fed released minutes from the Aug. 1 meeting of the Open Market Committee suggesting the monetary panel is ready to take more action to keep the economy out of recession.

"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," the minutes said.

Commodity prices were also mixed. Oil reached a three-month high, up 42 cents to $97.26 a barrel. However, gold dropped $2.40 to $1,640.50 an ounce.

“The Fed minutes point slightly more in the direction of QE,” said Seth Setrakian, the New York-based co-head of U.S. equities at First New York Securities, referring to an additional round of stimulus known as quantitative easing. “It’s certainly seems to have a dovish tone, just a little bit more than what people thought before. The markets have become much more favorably inclined since the minutes came out.”

Stocks worldwide fell earlier Wednesday after a report said Japan’s trade deficit was 517.4 billion yen ($6.5 billion) in July as Europe’s sovereign debt crisis and a slowdown in China dragged down exports.

Luxembourg Prime Minister Jean-Claude Juncker, the head of the euro group of finance ministers, said Wednesday in Athens he’s not advocating a third support package for Greece and that the country needed to press ahead with reforms it’s promised to European Union partners. Greek Prime Minister Antonis Samaras said earlier that his country needs “more air to breathe” in dealing with its debt crisis.

German Chancellor Angela Merkel and French President Francois Hollande meet Thursday to discuss the fiscal crisis, and both will talk separately with Greece’s Samaras later this week. Merkel signaled Wednesday she’s willing to discuss Greece’s request for more time to meet the terms of its international rescue, leaving the door open to potential concessions.

“The calendar is chock-full of U.S. and European policy event risk over the next few weeks,” wrote a team led by Myles Zyblock, the Toronto-based chief institutional strategist at Royal Bank of Canada, in a note dated Wednesday. “Given the prevailing optimism implied by market prices, we think there is room for policy disappointment.”

Commodity shares had the biggest gain among 10 groups in the S&P 500, rising 1 percent. Ten out of 11 members of the S&P Supercomposite Homebuilding Index advanced as the gauge climbed 3.1 percent.

PulteGroup Inc. (NYSE: PHM) jumped 3.9 percent as a report showed sales of existing homes climbed in July from an eight-month low.

DR Horton Inc. (NYSE: DHI) added 4.1 percent to $19, and Lennar Corp. (NYSE: LEN) rose 3.8 percent to $32.35. Toll Brothers Inc. (NYSE: TOL), the largest U.S. luxury homebuilder, jumped 3.8 percent to $33.01 after reporting third-quarter earnings that beat analysts’ estimates as revenue increased.

Discover Financial Services (NYSE: DFS) climbed 3.9 percent to $38.43. The Riverwoods, Ill.-based company announced a payment-processing deal with eBay Inc.’s (Nasdaq: EBAY) PayPal unit. PayPal customers will be able to use their accounts at more than 7 million merchant locations that already accept Discover starting in 2013. San Jose, Calif.-based eBay rallied 2.5 percent to $47.

Sunrise Senior Living Inc. (NYSE: SRZ), the manager of retirement communities, surged 60 percent to $14.26. Health Care REIT Inc. (NYSE: HCN), a Toledo, Ohio-based real estate fund that invests in housing and health care properties, said it will buy Sunrise for $14.50 a share in an all-cash transaction. That’s 62 percent higher than Sunrise’s closing price Tuesday. Health Care fell 2.7 percent to $58.14.

New York Stock Exchange: nyse.com

Nasdaq Stock Market: nasdaq.com