By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

Pending Federal Reserve decision takes a back seat to politics

U.S. stocks drifted lower Wednesday as the prospect of a tightening presidential race pushed investors away from perceived riskier investments such as global equities and toward the traditional havens of gold and the Japanese yen.

"Clearly, concerns about politics are taking over everything, including economic data or the Fed rate hikes," said Joe Saluzzi, partner, co-head of equity trading at Themis Trading.

"Markets thought they knew what the outcome of the presidential election going to be and got a curveball thrown at them after most recent polls turned upside down," Saluzzi said.

Read:Stock market fear factor rises as Clinton-Trump race tightens (http://www.marketwatch.com/story/stock-market-fear-factor-rises-as-clinton-trump-race-tightens-2016-11-01)

The S&P 500 index fell 2 points, or 0.1%, to 2,109, on track to post its seventh straight decline in a row. Six of the 11 main sectors were trading lower, with utilities leading declines. Energy shares were hit by another drop in crude-oil prices.

The Dow Jones Industrial Average slipped 21 points, or 0.1%, to 18,012, while the Nasdaq Composite Index was flat at 5,150.

The weakness on Wall Street came after U.S. stocks finished at nearly four-month lows on Tuesday, falling after polls showed a tightening presidential race. In particular, an ABC News/Washington Post tracking poll showed Republican nominee Donald Trump taking a one-point lead over rival Hillary Clinton (http://www.marketwatch.com/story/trump-takes-one-point-lead-over-clinton-in-fresh-poll-more-on-trump-tax-avoidance-strategies-2016-11-01).

(http://www.marketwatch.com/story/trump-takes-one-point-lead-over-clinton-in-fresh-poll-more-on-trump-tax-avoidance-strategies-2016-11-01)"The post-Brexit vote market reaction is still fresh in investors' memory, and no one wants to be caught on the wrong side of the trade," Hussein Sayed, FXTM's chief market strategist, said in a note on Wednesday.

"It will only take another one or two polls showing a Trump lead to boost markets anxiety and thus a steep sell off in equity markets and high beta currencies," he said.

Read: Mark Cuban says he's put on his 'biggest hedge' ever ahead of the election (http://www.marketwatch.com/story/mark-cuban-says-hes-put-on-his-biggest-hedge-ever-ahead-of-the-election-2016-11-01)

Global stocks tracked the weakness on Wall Street, keying off those political jitters. Most Asianmarkets suffered losses of more than 1%, with the exception of the Shanghai Composite Index, which finished 0.6% lower. European stock markets traded lower, led by banks.

The dollar was also under pressure (http://www.marketwatch.com/story/investors-turn-to-yen-dollar-rises-versus-mexican-peso-as-us-politics-rattle-2016-11-02), as investors sought refuge in the Japanese yen. The greenback strengthened against the Mexican peso , which tends to weaken on signs Trump's prospects are improving.

In another sign that investors are jittery, gold prices were climbing. The metal was up $8.60, or 0.7%, to $1,296.50 an ounce, holding above a one-month closing high marked on Tuesday.

Oil prices extended losses (http://www.marketwatch.com/story/oil-prices-retreat-on-expectations-for-a-big-jump-in-us-supply-2016-11-02) on expectations that U.S. crude supply saw a big jump last week.

Read: Chart shows investors less prepared for Trump win than they were for Brexit shock (http://www.marketwatch.com/story/are-stock-market-investors-complacent-about-a-clinton-election-victory-2016-10-31)

Fed decision day: The Federal Reserve will announce its decision on interest rates at 2 p.m. Eastern Time. Analysts generally expect the Fed will be unwilling to make any move on policy just days ahead of an increasingly uncertain U.S. election, but investors could see a strong statement about the central bank's intentions for a December move.

Read: Welcome to the Fed meeting, the only place in America where politics isn't being discussed (http://www.marketwatch.com/story/welcome-to-the-fed-meeting-the-only-place-in-america-where-politics-is-not-being-discussed-2016-11-01)

(http://www.marketwatch.com/story/welcome-to-the-fed-meeting-the-only-place-in-america-where-politics-is-not-being-discussed-2016-11-01)In economic news, employers added 147,000 private sector jobs last month (http://www.marketwatch.com/story/adp-says-private-sector-adds-147000-jobs-in-october-weakest-in-five-months-2016-11-02), the slowest pace since May, Automatic Data Processing Ind. reported.

Stocks to watch:Broadcom Limited(AVGO) said it has entered into a definitive agreement to buy Brocade Communications Systems Inc.(BRCD) for $5.9 billion. Brocade Communications shares were up 8.9%.

Allergan plc(AGN) shares dropped 1.8% after drugmaker reported weaker-than-expected quarterly results and lowered its outlook.

Estée Lauder Cos.(EL), shares dropped 3.7% as company's revenue was hurt by weak traffic.

Kate Spade & Co.(KATE) shares dropped 8% even after results in its latest quarter topped estimates despite a weak retail landscape.

Alibaba Group Holding Ltd.(BABA), shares rose 1.9% after the company posted revenue and earnings that easily topped expectations in the third quarter.

Valeant Pharmaceuticals International Inc.(VRX.T) shares fell 3.8% after soaring more than 30% in late trade Tuesday on reports that the pharma company is in talks to divest its stomach-drug business (http://www.marketwatch.com/story/valeant-shares-jump-more-than-30-on-divestiture-talks-2016-11-01).

Electronic Arts Inc.(EA) shares rose 3.5% after the videogame maker posted better-than-expected results Tuesday (http://www.marketwatch.com/story/electronic-arts-falls-despite-strong-results-from-fifa-17-2016-11-01).

Etsy Inc.(ETSY) initially rose after revenue beat Wall Street forecasts late Tuesday (http://www.marketwatch.com/story/etsy-shares-see-saw-after-company-misses-q3-revenue-expectations-2016-11-01). But turned lower, trading 2% down.

Facebook Inc.(FB) and Whole Foods Market Inc.(WFM) are among the companies due to report after the close.

Read: Throughout this surprising election, the one constant--a so-so economy (http://www.marketwatch.com/story/throughout-this-unending-campaign-the-one-constant-a-so-so-economy-2016-11-01)

(END) Dow Jones Newswires

November 02, 2016 09:50 ET (13:50 GMT)

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