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Stocks flat after Fed vows to keep stimulus policy going

Stocks finished flat on the final trading day of the month on Wednesday, after the Federal Reserve said it will maintain its bond-buying policy in its effort to bolster the economy.

(Read more: Obama defends Summers amid Fed speculation)

The Dow Jones Industrial Average finished 21 points lower, even though it had been up more than 100 points at its session high, setting a fresh intraday record of 15,634.32.

The S&P 500 and Nasdaq closed slightly higher. Earlier, the Nasdaq hit its best level since October 2000. But all three major averages rallied more than 4 percent each for the month and logged their best July performances since 2010.

The markets have been performing well since Federal Reserve Chairman Ben Bernanke reiterated last month that it would continue its monetary policies to stimulate the U.S. economy. On Wednesday, the central bank again said it will keep buying $85 billion in mortgage and Treasury securities per month. In its policy statement, the Fed also signaled its concern about higher mortgage rates and flagged the risks of inflation falling too far below its target.

But the Fed said that the economy is growing only modestly, a downgrade from its previous assessment in June.

(Watch:Art Cashin:Federal Reserve 'chickened out')

"Today's comments were what the market wanted," said Michael Sheldon, chief market strategist at RDM Financial Group. "The Fed didn't change too much in its statement…while the FOMC is likely to start tapering its asset purchase program before too long, Bernanke has reminded us that he is aware of the fact that rising rates can have an effect on the economy and inflation remains low.

"These two factors indicate that the Fed will likely not be in a big rush unless economic data strengthens faster than expected," Sheldon said.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded above 13 on Wednesday. Among key S&P sectors, consumer discretionary and energy led the gainers, while utilities slid.

Earlier in the session, data showed that economic growth in the U.S. unexpectedly accelerated in the second quarter, with the GDP growing at a 1.7 percent annual rate, according to the Commerce Department. And private employers added 200,000 jobs in July, topping economists' expectations in an encouraging sign for the labor market recovery.

The ADP report came ahead of the widely-watched government jobs data, due at the end of the week. Economists surveyed by Reuters expect non-farm payrolls to have risen 184,000 in July.

(Read more:Big jobs number coming? Data firm says just 23,000)

In another upbeat sign for the economy, the pace of business activity in the Midwest picked up modestly in July. And U.S. labor costs rose in the second quarter, according to the Labor Department.

About 60 percent of S&P 500 companies have posted quarterly results so far, with 67 percent of firms exceeding earnings expectations and about 55 topping revenue estimates, according to the latest data from Thomson Reuters.

Asian and European shares were mixed ahead of the Fed announcement. The Japanese Nikkei widened losses as dollar-yen fell below the 98-handle, as investors digested the latest batch of corporate earnings. The Nikkei has been steadily declining since hitting a two-month high at 14,953 points on July 19.