Stocks waver amid investor caution

Stocks pared earlier losses and ended virtually unchanged Thursday, as investors remained cautious ahead of next week's Federal Reserve meeting.

Starting the session with strong gains, stocks were fueled by optimism from corporate earnings and a report showing fewer people filing for first-time unemployment. However, skittishness prevailed and stocks seesawed throughout the session.

The Dow Jones industrial average closed 12 points lower, or 0.1 percent, with 3M and Caterpillar leading the decline. Earlier, the blue chip index had added as many as 53 points and had lost 74 points.

The S&P 500 finished 1 point higher, or 0.1 percent, while tech-heavy Nasdaq gained 4 points, or 0.2 percent.

Dollar lower again as investors wait for Fed

Currency investors are bracing for dynamic changes to monetary and fiscal policy that could come next week.

Election night is Tuesday, and Republicans are expected to retake control of the House of Representatives, which could lead to a change in how much the federal government spends on economic stimulus.

But for the currency market, the bigger story is on Wednesday with a widely anticipated policy announcement from the Federal Reserve. The central bank is expected to unveil a new round of asset purchases at its policy meeting, a two-day session that wraps up on November 3.

Treasuries tied in knots ahead of Fed, elections

Election night is Tuesday, the Fed announcement is Wednesday, and the relief will come shortly thereafter for a bond market that has been tied in knots with speculation over the outcome of these two events.

Will the Fed engage in another round of quantitative easing? And which political party will control Congress?

Those are the two questions on investors' minds, and with good reason. The answers will have a wide reaching effect on monetary, fiscal and currency policy.

 - CNNMoney.com reporters Julianne Pepitone and Hibah Yousuf contributed to this report.