Stocks Pare Losses on Hopes Fed Will Step In

A widening trade deficit in Japan and the uncertainty presented by Greece's efforts this week to extend deadlines to fulfill fiscal targets tied to its receipt of additional bailout funds also added to the risk-off mood that predominated for much of the day.

Decliners were running ahead of advancers by a 1.5-to-1 ratio on the New York Stock Exchange and 1.7-to-1 on the Nasdaq. Continuing with the low volume trend in August, only 3.05 billion shares traded on the Big Board and just 1.46 billion were in play on the Nasdaq.

The weakest sectors in the broad market were capital goods, consumer non-cyclicals and conglomerates. The basic materials and services sectors were positive.

The FTSE in London closed down 1.42% and the DAX in Germany settled lost 1.01%. The Hong Kong Hang Seng index closed 1.06% lower and the Nikkei in Japan fell 0.27%.

October crude oil futures closed up 42 cents at $97.26 a barrel while December gold futures pulled back after Tuesday's dramatic spike higher, to settle down $2.40 at $1,640.50 an ounce. Gold jumped again though in the wake of the Fed minutes.

The benchmark 10-year Treasury was surging 30/32, diluting the yield to 1.699%. The greenback was down 0.4, according to the dollar index.

On the corporate front, Toll Bros.(TOL) , the Horsham, Pa.-based luxury-home builder, reported fiscal third-quarter earnings of $61.6 million, or 36 cents a share, on revenue of $554.3 million, coming in ahead of the average estimate of analysts polled by Thomson Reuters for a profit of 18 cents a share on revenue of $510.1 million. Shares gained 3.8%.

American Eagle(AEO) , the Pittsburgh-based fashion apparel retailer, reported an in-line profit for its fiscal second quarter and lifted its full-year earnings outlook early Wednesday. Shares closed higher by 6.2%.

Shares of the San Francisco-based specialty retailer Williams-Sonoma(WSM) surged 11.6% after the company beat Wall Street's expectations for its fiscal second-quarter results and lifted its outlook for the full year.