US equity investors looked past inflation concerns and rising interest rates and instead shifted their focus on mega-cap tech earnings this week.
Mega-cap tech led the market higher Wednesday as the yield on the 10-year Treasury note slipped. CPI data showed prices rising in September.
The Fed's emergency asset purchases have lifted markets and supported the recovery since early 2020. They could start shrinking later in the fall.
Investors are closely watching the two-day meeting of the FOMC for clues from Fed officials on the timing and pace of tapering of asset purchases.
"This reinforces our belief that in the event of a well-deserved pullback, it would be an opportunity to buy at cheaper prices," a strategist said.
"I can see them delay," El-Erian told CNBC. "Clearly not September now. November will be tricky. Maybe December."
"Progress in the labor market is the missing piece of the puzzle for the Fed to set into motion," a managing director said.
"The Federal Reserve should start taking away the punchbowl by tapering after the next strong jobs report," a CIO said.
European and Asian equities lose ground as the Fed adds to anxiety about the impact of the Delta variant on economic recovery.
"So as long as the 'Big Three' aren't saying it, the market is not going to be listening to anything else," El-Erian told CNBC.
Home prices surged in May at the fastest rate in 30 years. Minutes from the Fed's June meeting show the central bank talking about cooling the market.
US stocks fell and yields rose after Fed officials signaled they may begin dialing back accommodative stimulus that has fueled the economic recovery.
The FOMC is expected to hold interest rates unchanged and announce no changes to its asset purchases when the decision is released at 2 p.m ET today.
The Fed previously indicated rates would stay near zero through 2023. The estimates suggest officials may want to slow inflation earlier than expected.
Gold steadied after three days of losses ahead of the Fed's policy statement that investors will scour for clues on inflation and interest rates.
"Despite the 'transitory' message regarding inflation, some on the Committee must be twitching a little uncomfortably," an analyst said.
"It is going to be increasingly difficult for the Fed to soothe markets with its dovish stance," Bank of America said Tuesday.