The U.S. central bank is expected to announce when it will begin paring its bond holdings, and while a September interest rate increase is not expected, investors will closely study Fed Chair Janet Yellen's views on inflation for clues whether the Fed will raise rates in December.
"It seems the market is holding its breath and waiting for what the Fed has to say regarding the economy and any future interest rate hikes," said Ryan Detrick, senior market strategist for LPL Financial.
"The market could throw a little bit of a fit if they push (balance sheet reduction) back. It could hurt financials and the overall market might not like the uncertainty," he added.
Six of the 11 major S&P sectors closed higher, with the financial sector's 0.8 percent gain providing the biggest boost. The sector has risen in seven of the last eight sessions, clocking a 6 percent rise in that time.
If the Fed reduces its balance sheet, investors are betting that would lift yields for longer-term treasuries, which could boost bank profits, Detrick said.
The Dow Jones Industrial Average rose 39.45 points, or 0.18 percent, to 22,370.8, clocking its sixth straight record close. The S&P 500 gained 2.78 points, or 0.11 percent, to 2,506.65, hitting its fifth record closing high in the last six sessions.
The Nasdaq Composite added 6.68 points, or 0.1 percent, to 6,461.32, also squeaking out a record closing high, slightly above its Sept. 13 close.
The biggest percentage gain was the telecom services sector's 2.3 percent jump on merger and acquisition speculation.
The biggest U.S. telephone operators, Verizon and AT&T, rose more than 2 percent, providing the second- and third-biggest individual stock boosts for the S&P. Shares of smaller wireless carrier T-Mobile rose 5.9 percent and Sprint jumped 6.8 percent, following a report they were in active merger talks.
The healthcare index was one of the biggest laggards, with declines in insurers such as United Health , which fell 1.8 percent due to the latest efforts in Washington to overhaul Obamacare.
Best Buy fell 8 percent after the No. 1 U.S. electronics retailer forecast fiscal 2021 adjusted earnings well below Wall Street estimates. The stock was one of the biggest drags on the consumer discretionary index.
Tesla fell 2.6 percent after Jefferies started coverage of the electric car maker's stock with an "underperform" rating.
Advancing issues outnumbered declining ones on the NYSE by a 1.09-to-1 ratio; on Nasdaq, a 1.04-to-1 ratio favored advancers.
About 5.8 billion shares changed hands on U.S. exchanges. That compares with the 5.9 billion daily average for the past 20 trading days, according to Thomson Reuters data. — Reuters
