Today's market forecast: 'Extreme volatility' after Fed meeting

NEW YORK -- When the Fed will "taper" its stimulus has become an obsession of Wall Street.

No matter what the Federal Reserve decides, financial markets could swing significantly later Wednesday after the central bank concludes its two-day September policy meeting.

The markets typically make big moves on days such as this, when the Fed announces interest rate policy and to what extent it will continue its massive monthly bond buying.

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But this meeting is different. Many investors and economists have been speculating at this meeting the Fed could decide to scale back its bond purchases, a monetary stimulus program known as quantitative easing. Fed officials have said their decision would hinge on whether data point to the economy being able to stand on its own.

When the Fed announces its decision at 11 a.m. PDT, investors can expect "extreme volatility," says Eric Scott Hunsader, founder of the financial research firm Nanex.

U.S. stock indexes have been essentially flat in early trading on Wall Street. But once the Fed decision is announced, high-speed traders and many other professional market players will reposition their portfolios based on the news. Hunsader said stocks will probably reach intra-day highs and lows following the meeting, and could potentially double back and set new highs and lows before the closing bell.

"Every Wall Street network system will be taxed to its limit," Hunsader said. "Investors are just better off not getting in the way of this and just letting it settle out."

The Fed has helped fuel this year's stock rally, which has pushed major U.S. indexes to new all-time highs. The Dow Jones industrial average is up more than 18% so far this year, while the broader Standard & Poor's 500 index is up nearly 20%. The Nasdaq composite is up 24% as of early Wednesday.

The Fed has been nudging investors into riskier assets like stocks by pushing down long-term rates, making bonds less attractive.

Bond investors have been expecting long-term interest rates to rise when the Fed eases off its massive $85 billion-a-month bond purchases. The benchmark 10-year Treasury bond's yield hovered around 2.9% early Wednesday.

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