US stocks traded lower as investors shifted focus to the Federal Reserve two day policy meeting.
Most investors were nervous as the meeting commenced on Tuesday with many expecting the meeting to give more insight on the Fed’s Interest hike policy. It is widely expected that the Fed will pave way for a hike in the lending rates this summer.
The already dour mood on Wall Street was helped little by a housing report showing a drop in new house construction.
The S&P 500 index pulled back from a rally in the previous session by slipping 14.6 points or 0.5% to 20270.4 at 10.30 Am in New York. All 10 of its major sectors traded in the negative.
The benchmark index had, in the previous session, registered its biggest gain since Feb 3.
“Yesterday’s rally was pretty impressive,” Yousef Abbasi, the global market strategist at JonesTrading Institutional Services LLC in New York, told Bloomberg by phone.
“A lot of people were pointing to the fact with the looming Fed decision you’re likely to see Yellen tiptoe on the line and err on side of caution.”
The Dow Joes Industrial Average declined 170 points or 0.9% to 17,804.2 with almost all of its 30 members trading in the negative.
The NASDAQ Composite index slipped 0.3%.
“The sideways trading action since the end of QE is an indication that people are confused about the economy. Tomorrow’s statement is unlikely to bring about any clarity to markets, as the Fed is likely to replace the word ‘patient’ with ‘slow path’ rhetoric,” Ed Shill, chief investment officer at QCI Asset Management, told MarketWatch.
“But markets are absolutely wrong about the June-September rate hike, because they have ignore one of the biggest words the Janet Yellen has been saying all this time — ‘if’. The Fed will raise if we see strong employment growth, wage growth and inflation at 2%. But none of that is happening,” Shill added.
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