By Riva Gold
A decline in energy shares carried U.S. stocks lower, a day after jitters about the U.S. presidential election helped send the S&P 500 to a sixth consecutive sessions of declines.
Stocks remained lower after the Federal Reserve, as expected, left interest rates unchanged at the conclusion of its November meeting, but it sent new hints that it expects to raise rates in December at its final scheduled meeting of 2016.
Shares of energy companies led declines in the S&P 500, falling 1.6% as the price of U.S. oil dropped 3.4% to $45.14 a barrel. The losses came after inventory data showed a much larger-than-expected rise in crude stockpiles.
The Dow Jones Industrial Average fell 57 points, or 0.3%, to 17980. The S&P 500 lost 0.6% and the Nasdaq Composite declined 0.8%.
The Fed's post-meeting policy statement pointed to signs that inflation is firming, an indication officials are prepared to raise rates in the weeks ahead. It also included a subtle suggestion that the bar to raising rates for the first time in a year is low, saying it only needed "some further evidence" of economic progress before moving.
Tightening polls in the U.S. presidential race also continued to steer market sentiment. A Washington Post-ABC News tracking poll showed Republican candidate Donald Trump leading in the U.S. presidential race on Tuesday, sparking uncertainty after investors had broadly priced in a victory for Hillary Clinton.
"Until last Friday, markets had become a bit complacent and most people thought it would be very difficult for Trump to win," said Philip Marey, U.S. strategist at Rabobank.
Now, global investors are worried about the uncertainty of a Trump presidency in terms of policy and the possible implications for trade, he said.
The Stoxx Europe 600 declined 0.6% after a downbeat close on Wall Street and in Asia, building on seven straight sessions of European declines. Losses were steepest in the retail and banking sectors.
Shares in Asia were red across the board, with Japan's Nikkei Stock Average shedding 1.8% as shares of exporters and banks fell, while Hong Kong's Hang Seng dropped 1.5%. Stocks in Australia fell 1.2%.
"I've covered a number of elections in my 20 years, but this has been the most fractious and difficult to watch," said Kully Samra, managing director at Charles Schwab. Still, he said, earnings and U.S. economic data should be more important for the market in the long run, he said, and an election-related selloff could be short-lived.
The CBOE Volatility Index, which measures investors' expectationsfor stock swings, closed higher Tuesday for a sixth consecutive session. The VIX has nonetheless remained below its long-term historic average, according to Randy Frederick, vice president of trading and derivatives at Schwab.
"There's a degree of uncertainty out there, but not panic uncertainty," he said.
As investors shied away from risk, the dollar fell 0.8% against the yen to Yen103.223, while gold rose 1.2% to $1,303.10 an ounce, following on its biggest daily gain since September.
Sovereign bond yields, which move inversely to prices, came under pressure. The yield on the 10-year U.S. Treasury note fell to 1.805% from 1.822% on Tuesday, while 10-year German bund yields fell to 0.135% from around 0.18%, according to Tradeweb.
The broader WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, fell 0.4% after three sessions of declines.
The Mexican peso, which has been sensitive to the U.S. election in part because of Mr. Trump's comments on trade, extended declines Wednesday. The dollar was recently up 1.2% against the peso.
While investors said they expect the Fed to keep interest rates unchanged Wednesday, they were planning to parse the central bank's statement for signals about the course of rate rises.
Since there is no press conference this meeting, "We'll be looking at the language, phrases like 'at the next meeting' or 'in the next few meetings'," said Mr. Samra.
The Fed voted 7-3 in September to keep rates unchanged in a range between 0.25% and 0.5%, stating that the case for higher rates "has strengthened," but it wanted to wait "for the time being" for "further evidence" of a strengthening economy before acting.
Since then, U.S. third-quarter growth figures came in slightly above expectations, while investors have pointed to a modest pickup in core inflation as a sign the Fed is likely to remain on course.
Fed funds futures, used by investors to bet on central bank policy, pointed to a 7.2% chance of a rate rise later Wednesday, but a 74% chance of higher rates by the conclusion of the December meeting, according to CME Group.
Shares of Electronic Arts rose 2.6% after the game publisher reported a jump in quarterly revenue and nudged up its outlook for the year. Facebook is due to report after markets close.
Aaron Kuriloff contributed to this article
Write to Riva Gold at firstname.lastname@example.org
(END) Dow Jones Newswires
November 02, 2016 14:21 ET (18:21 GMT)
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