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The close: Rally fades as Fed puts limits on policy Add to ...

U.S. stocks ended almost flat on Wednesday, after the Federal Reserve provided another round of economic stimulus but added that monetary policy cannot overcome the effects of the so-called “fiscal cliff.”

The S&P 500 closed at 1428.48, up 0.64 point or zero per cent. That’s about 10 points below its intraday high but good enough to count as a sixth consecutive day of gains. The blue-chip Dow Jones industrial average closed at 13,245.45, down 2.99 points.

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In Canada, the S&P/TSX composite index closed at 12,353.09, up 70.73 points or 0.6 per cent, after the commodities-heavy index benefited from a rally in materials stocks.

The gyrations followed the latest monetary policy statement from the Federal Reserve, in which it announced plans to buy $45-billion (U.S.) in Treasury securities each month, starting in the New Year. The central bank also said it would keep its key interest rate exceptionally low as long as the unemployment rate remained above 6.5 per cent.

The commitment to low rates and additional stimulus sent stocks higher in midday trading. However, the rally faded after Fed chairman Ben Bernanke cautioned in a press conference that monetary policy can only go so far in counteracting the effects of automatic tax increases and spending cuts should Washington not agree on a budget.

Berkshire Hathaway Inc. rose 2.4 per cent after it announced it was buying back $1.2-billion (U.S.) of its own shares, signalling that Warren Buffett sees value close to home these days. The company also raised the value at which it would make future buybacks, to 120 per cent of book value from 110 per cent.

Apple Inc. fell 0.4 per cent after reports suggested that the technology company is moving forward with its plan to produce television sets.

Research In Motion Ltd. continued its rally, rising 5.8 per cent. The latest bump followed leaked images of its new line of phones, using the BlackBerry 10 platform that is attracting a lot of positive buzz.

Canadian National Railway Co. fell 0.5 per cent, even though Cascade Investment, controlled by Bill Gates, said that it had increased its stake to about 12 per cent.

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