por admin » Mar Mar 14, 2017 9:31 am
Stocks, Oil Slide Ahead of Fed Decision
Dollar gains and pound falls as U.K. prepares for Brexit negotiations and Scotland seeks another independence referendum
By Riva Gold and Akane Otani Updated March 14, 2017 10:12 a.m. ET
U.S. stocks fell Tuesday as a looming rate rise, falling oil prices and a range of political jitters kept investors cautious.
The Dow Jones Industrial Average declined 47 points, or 0.2%, to 20835 shortly after the opening bell. The S&P 500 lost 0.4% and the Nasdaq Composite fell 0.5%.
The Fed is widely expected to raise interest rates Wednesday for the first time this year and offer signals on the path for monetary policy in coming months.
Even though the prospect of higher borrowing costs has shaken stocks in the past, investors have reacted relatively calmly so far to the prospect of gradual rate rises amid signs of a firming global economy and growing corporate earnings. The S&P 500 hasn’t closed down 1% or more in 104 trading days, the longest such streak since 1995.
“Everyone’s on hold right now ahead of these policy meetings,” said Jimmy Chang, chief investment strategist at Rockefeller & Co. With many investors having already priced in the odds of a rate hike this week, Mr. Chang said he will be paying closer attention to comments Fed officials make Wednesday.
Shares of energy companies fell Tuesday as U.S. crude oil extended declines.
The S&P 500 energy sector dropped 1.8%, with Marathon Oil and Chesapeake Energy among the biggest decliners. U.S. crude oil fell 2.1% to $47.40 a barrel, on track for its seventh consecutive session of declines.
Recent declines in oil prices have already started to weigh on pockets of high-yield bonds and drag down oil and gas companies shares, according to Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.
The Federal Reserve in Washington, D.C. Investors have retreated to the sidelines ahead of the conclusion of this week’s policy meeting.
The Federal Reserve in Washington, D.C. Investors have retreated to the sidelines ahead of the conclusion of this week’s policy meeting. Photo: kevin lamarque/Reuters
“It does affect business fixed investment and economic growth if we see a continued downturn,” she said.
Government bonds reversed early losses as investors sought haven assets, with the yield on 10-year U.S. Treasurys falling to 2.602%, according to TradeWeb, from 2.609% Monday—its highest settlement since 2014. Yields fall as bond prices rise.
In currencies, the WSJ Dollar Index was recently up 0.2%. The prospect of higher interest rates tends to make the U.S. currency more attractive to yield-seeking investors.
Federal-funds futures, used by investors to place bets on central-bank policy, put the chances of an interest-rate increase this month at roughly 93%, up from 89% Monday, according to CME Group.
“It would be a surprise if they did not move at this point,” said Dominic Pappalardo, a fixed income strategist at McDonnell Investment Management.
“More interesting from the Fed will be any forward-looking commentary on when they intend to move again, or if they signal which factors they’re watching most closely,” he said.
In Europe, investors backed away from risk assets after U.K. lawmakers on Monday removed the final hurdle to starting talks on exiting the European Union. The Stoxx Europe 600 declined 0.4%, and the British pound was last down 0.6% against the U.S. dollar at $1.2143.
“Chances are we’re going to hear some pushback from Europe, and undoubtedly that could be negative for sterling,” said Jane Foley, currency strategist at Rabobank.
Separately, Scotland’s chief minister said Monday she plans to seek a second referendum on Scottish independence within two years, adding to pressure on the currency.
Earlier, shares in Hong Kong and Japan ended fractionally lower as traders held off on big positions ahead of the Fed meeting and other global central bank meetings later this week.
The Shanghai Composite Index gained 0.1% after data showed industrial production and investment accelerated faster than expected in China in the first two months of the year, and Chinese housing sales growth picked up slightly.
Indian stocks advanced while the rupee hit its best level in a year against the dollar following a landslide victory for Prime Minister Narendra Modi’s Bharatiya Janata Party in India’s most-populous state.
—Kenan Machado contributed to this article.