By Sue Chang and Anora Mahmudova, MarketWatch
Fed says case for rate increase stronger
U.S. stocks extended losses on Wednesday, with the S&P 500 recording its longest losing streak in five years after the Federal Reserve, as expected, kept interest rates unchanged.
In announcing its decision, the Fed indicated that it doesn't need for much more evidence (http://www.marketwatch.com/story/fed-doesnt-need-to-see-much-more-evidence-before-raising-interest-rates-2016-11-02) to justify a move, boosting the chances of a hike at its final meeting of the year.
"The committee judges that the case for an increase in the federal-funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of further progress toward its objectives," the Fed said in a statement.
Fed watchers latched on to the word "some" as confirmation that a December move is likely. Analysts at BNP Paribas now see about a 75% chance of a 25 basis point hike next month, compared with 65% before Wednesday's meeting.
However, the market's attention was mostly on the election with investors growing nervous as the latest polls showed a tightening presidential race.
Read: These 5 charts show how the U.S. election is rattling financial markets (http://www.marketwatch.com/story/these-5-charts-show-how-the-us-election-is-rattling-financial-markets-2016-11-02)
The S&P 500 index dropped 13.78 points, or 0.7%, to close at 2,097.94, falling for seven sessions in a row for the first time since November 2011. All 11 main sectors closed lower, led by real estate shares.The Dow Jones Industrial Average declined 77.46 points, or 0.4%, to finish at 17,959.64. The blue chip index has not closed under 18,000 since July. The Nasdaq Composite Index shed 48.01 points, or 0.9%, to end at 5,105.57, its lowest close since late July.
See:There's something strange about the stock market's long losing streak (http://www.marketwatch.com/story/theres-something-strange-about-the-stock-markets-long-losing-streak-2016-11-02)
"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."
Meanwhile, Brett Ewing, chief market strategist at First Franklin, suggested that an election with "less than desirable candidates" contributed to the Fed's decision to keep rates unchanged.
Read: There's more bad news ahead for stocks even after the election (http://www.marketwatch.com/story/theres-more-bad-news-ahead-for-stocks-even-after-the-election-2016-11-02)
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).
"People would rather miss out on the post-election rally than being caught wrong-footed if Trump indeed wins the presidency, which many assume will be bad for markets," said Jennifer Ellison, principal at BOS, California-based investment advisory firm.
Global stocks tracked Wall Street's moves, keying off those political jitters. Most Asian markets suffered losses of more than 1%, with the exception of the Shanghai Composite Index, which finished 0.6% lower. European stock markets closed sharply lower.
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 indication that investors are jittery, gold prices climbed, settling above $1,300. Oil prices extended losses (http://www.marketwatch.com/story/oil-prices-retreat-on-expectations-for-a-big-jump-in-us-supply-2016-11-02) dropping to five-week lows after U.S. data revealed that crude stockpiles saw the largest weekly climb on record.
Read: (http://www.marketwatch.com/story/are-stock-market-investors-complacent-about-a-clinton-election-victory-2016-10-31)Why gold will be 'only clear winner' among commodities if Trump wins (http://www.marketwatch.com/story/why-gold-will-be-the-only-clear-winner-among-commodities-if-trump-wins-2016-11-02)
(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, private-sector 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.
See:ADP tweaks its closely watched jobs report (http://www.marketwatch.com/story/adp-tweaks-its-closely-watched-job-report-2016-11-02)
Stocks to watch:Broadcom Ltd.(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 9.6%.
Allergan plc(AGN) shares dropped 5.2% after drugmaker reported weaker-than-expected quarterly results and lowered its outlook.
Estée Lauder Cos.(EL), shares fell 5.5% as company's revenue was hurt by weak traffic.
Kate Spade & Co.(KATE) shares sank 10% even after results in its latest quarter topped estimates despite a weak retail landscape.
Alibaba Group Holding Ltd.(BABA) shares skidded 2.6% after the company posted revenue and earnings that easily topped expectations in the third quarter.
Valeant Pharmaceuticals International Inc.(VRX.T) shares shed 12% 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 1.6% after the videogame maker posted better-than-expectedresults 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, tumbling 13%.
--Barbara Kollmeyer contributed to this report.
(END) Dow Jones Newswires
November 02, 2016 16:30 ET (20:30 GMT)
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