S&P Dow flat ahead of Fed decision; Apple weighs on Nasdaq

By Sruthi Shankar

REUTERS - The S&P and the Dow were little changed on Wednesday but hovered near record levels as investors waited to hear from the Federal Reserve on future interest rate hikes this year while the tech-heavy Nasdaq was pulled lower by a drop in Apple.

The iPhone maker's shares fell 2.5 percent and was the biggest drag on all three indexes after reports that the company admitted to connectivity issues with its latest smartwatch.

Investors focused on Fed's policy statement and projections due to be released at 2 p.m. ET (1800 GMT). Fed Chair Janet Yellen will hold a press conference half an hour later, which will be closely watched for views on inflation.

The central bank is likely to keep interest rate unchanged and say that it will start unwinding its holdings of about $4.2 trillion in bonds and mortgage-backed securities.

Inflation has remained below the Fed's 2-percent target rate, but a recent data showed uptick in domestic consumer prices, which raised the chances of a December rate hike by more than 50 percent for the first time since July.

"The Fed is continuing to confirm the narrative that the lack of inflation has been somewhat transitory and expect inflation to pick up," said Emily Roland, head of investment research at John Hancock Investments in Boston.

"Certainly that will have a big influence as we look towards the readings on inflation going forward."

Traders were betting on a 55.8 percent chance of a December hike, compared with 37.3 percent a month ago, according to the CME Group's FedWatch tool.

At 11:02 a.m. ET, the Dow Jones Industrial Average was down 1.88 points, or 0.01 percent, at 22,368.92, the S&P was down 1.73 points, or 0.07 percent, at 2,504.92 and the Nasdaq Composite was down 26.50 points, or 0.41 percent, at 6,434.82.

Seven of the 11 major S&P sectors were higher, led by 0.51 percent gain in the telecom services sector.

The technology index was the biggest laggard, weighed down by Apple, Adobe and Western Digital.

Adobe fell 4 percent after the Photoshop maker's revenue forecast came in line with estimates.

General Mills was down about 5 percent after its quarterly profit missed estimates, hurt by lower sales of its yogurts and cereals in North America.

Shares of other food companies, including JM Smucker and Kellogg, were down about 2 percent.

Western Digital slipped more than 4 percent after Japan's embattled Toshiba agreed to sell its semiconductor business to a group led by private equity firm Bain Capital. The stock was the biggest percentage loser on the S&P technology index.

Bed Bath & Beyond sank 17 percent to its lowest since 2009 after the home furnishing retailer reported earnings and sales below estimates, prompting a slew of price target cuts.

Advancing issues outnumbered decliners on the NYSE by 1,684 to 1,010. On the Nasdaq, 1,515 issues rose and 1,177 fell.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)

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