NEW YORK (Reuters) - The S&P 500 erased earlier losses to close flat on Wednesday after minutes from the latest Federal Reserve meeting indicated the central bank might be ready for another round of stimulus.
Minutes from the July 31-August 1 meeting suggested the Fed is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably.
The only question for markets is whether the recent improvement in economic data, which came after that meeting, will have convinced Fed Chairman Ben Bernanke that no action is necessary.
"The market is questioning if the improvement we're seeing is substantial enough for Chairman Bernanke. He wants the (recently improving) economic data to translate into private- sector job creation," said Quincy Krosby, market strategist at Prudential Financial, in Newark, New Jersey.
"The initial reaction from the markets is that it is sooner rather than later that the Fed will come in."
Stocks had spent most of the session in negative territory after weak export data from Japan and caution over Greece's meetings this week with European Union officials gave investors reasons to pull back after the recent rally.
Among the most actively traded U.S. stocks on Wednesday was Dell Inc DELL.O, down 5.4 percent at $11.68 a day after the No. 2 U.S. PC maker warned of a challenging second half and slashed its full-year earnings outlook. The NYSEArca computer hardware index .HWI lost 1 percent.
Following on the heels of Dell's results, Hewlett-Packard Co (HPQ.N) slipped 1.1 percent to $18.99 after the close as the world's largest PC maker posted a third-quarter loss.
On Tuesday, the S&P 500 hit its highest level in more than four years, but failed to hold that peak, and the index closed in the red. However, the S&P's steady move higher has lifted short-term support to the 1,400 level, although the index may need a positive catalyst to extend the rally.
The Jackson Hole, Wyoming, meeting of central bankers and economists at the end of the month is seen as possibly the next big market catalyst, followed by the European Central Bank's September 6 meeting and the German constitutional court's vote to ratify the euro zone's rescue fund six days later.
The Dow Jones industrial average .DJI dropped 30.82 points, or 0.23 percent, to 13,172.76. The Standard & Poor's 500 Index .SPX added 0.32 of a point, or 0.02 percent, to 1,413.49. The Nasdaq Composite Index .IXIC gained 6.41 points, or 0.21 percent, to 3,073.67.
Japan's exports slumped the most in six months in July as shipments to Europe and China tumbled, adding to concerns about global demand after a string of dire trade figures from Asia's export engines.
Uncertainty lingered over the effectiveness of Greek Prime Minister Antonis Samaras' attempts to convince other European officials that his country should be given more time to meet targets for deficit cuts.
Toll Brothers Inc (TOL.N) shares rose to $33.68, their highest since February 2007, after the largest U.S. luxury homebuilder reported a higher quarterly profit and a sharp jump in new orders. At the close, the stock was up 3.8 percent at $33.01. The PHLX housing sector index .HGX advanced 2 percent.
Continuing a string of bullish housing sector data, U.S. home resales rose in July as low interest rates and a modest improvement in the labor market helped home buying conditions.
Shares of Sunrise Senior Living SRZ.N surged 59.7 percent to $14.26 after Health Care REIT Inc (HCN.N) said it would acquire the company for $14.50 per share. Health Care shares slid 2.7 percent to $58.14.
Volume was light with about 5.45 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the daily average of 6.62 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of 3 to 2, while on the Nasdaq, five stocks fell for every three that rose.
(This story was refiled to show that Hewlett-Packard is world's largest PC maker)