U.S. stocks traded lower on Tuesday as investors focused on the Federal Open Market Committee’s two-day meeting, which could shed light on the timing of an interest rate hike.
“Today really is a bit of a waiting game. A lot of the trade today will be related to (options) expiration” on Friday, said JJ Kinahan, chief derivatives strategist at TD Ameritrade. He expects some intraday volatility and movement in the tech sector ahead of Oracle‘s earnings after the bell. Adobe Systems also reports after the close.
The Dow Jones industrial average slumped more than 150 points, down 0.90 percent, near 17,810, as the index struggled to hold onto gains for the year. DuPont and Caterpillar were among the greatest laggards as all blue chips except Coca-Cola fell.
The S&P 500 fell 14 points, or 0.67 percent, at 2,067, with materials leading all ten sectors lower. Analysts are watching to see if the index holds above the 2050-2055 range, slightly below the 50-day moving average.
The Nasdaq fell 20 points, or 0.41 percent, at 4,909.
Housing starts fell 17 percent in February to the lowest level in a year as harsh winter weather took its toll. More encouragingly, building permits rose 3 percent and January housing starts were revised slightly higher to 1.08 million.
The FOMC meeting kicks off Tuesday, with its highly anticipated statement and press conference expected on Wednesday afternoon. Investors are looking at whether or not “patient” remains in the statement as an indication of when short-term interest rates might go up.
“I don’t think they will signal a rate hike in June,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “Whether or not they drop ‘patient’ is irrelevant. They’ll probably replace it with another word that might indicate patience.”
The U.S. dollar continued to ease, falling about 1 percent, while the euro edged above $1.06. The U.S. 10-year Treasury yield traded near 2.06 percent.
Crude oil traded lower but traded above 6-year lows touched on Monday. Brent struggled to hold above $53 a barrel.
“I think we’re still tied to the dollar,” said Art Hogan, chief market strategist at Wunderlich Securities. “The correlation really hasn’t broken down. The correlation is tighter with currency than with oil.”
US Dollar index for the last 10 days
DSW beat estimates by 7 cents with adjusted quarterly profit of 35 cents per share, with sales easily beating estimates. DSW saw comparable store sales rise 7.6 percent, and it also raised its quarterly dividend to 20 cents per share from 18¾ cents per share.
Burlington Stores reported adjusted quarterly profit of $1.43 per share, 11 cents above estimates, with revenue also exceeding forecasts. Burlington saw comparable store sales rise 6.7 percent from a year earlier.
Alibaba was upgraded by Stifel Nicolaus to “buy” from “hold” and added to the Stifel “Select List.” Stifel cites long-term benefits from improvements to the online retailer’s platform, and notes its multiples compare favorably to those of competitor Amazon.com.
Last week, Skyworks Solutions replaced PetSmart in the index on BC Partner’s acquisition of the pet supplies retailer.
Two shares declined for every advancer on the New York Stock Exchange, with an exchange volume of 185 million and a composite volume of 911 million in late morning trade.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 16.
High-frequency trading accounts for 47.5 percent of daily trading volume, according to TABB Group. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.
Crude oil futures fell 69 cents, or $1.60, to $43.19 a barrel on the New York Mercantile Exchange. Gold futures gained 40 cents, or 0.03 percent, at $1,153.40 an ounce as of 11:13 a.m.
European equities declined on Tuesday, pulling back from highs reached on Monday, as investors there weighed economic data and focused on the Fed meeting in the United States.
U.S. stocks jumped more than 1 percent on Monday, following three weeks of decline in the Dow and S&P 500, as investors positioned themselves ahead of the Fed meeting and options expirations.
As of Monday’s close:
- The Dow Jones industrial average was within one standard deviation above its 50-day moving average. Since 1981 the index has been in this position 6.51 percent of all trading days, according to quantitative analytics tool Kensho. The probability of the index moving lower is 52.3 percent and the probability of it moving higher in the days following is 47.7 percent.
- The S&P 500 was within one standard deviation above its 50-day moving average. Since 1980 the index has been in this position 6.25 percent of all trading days, according to Kensho. The probability of the index moving higher in the days following is 53.3 percent and the probability of it moving lower is 46.7 percent.
- The Nasdaq composite was within 1.5 standard deviations above its 50-day moving average. Since 1980 the index has been in this position 7.40 percent of all trading days, according to Kensho. The probability of the index moving lower is 61.9 percent and the probability of it moving higher is 38.1 percent.
—CNBC’s Peter Schacknow contributed to this report.
Disclosure: CNBC’s parent NBCUniversal is a minority investor in Kensho.
On tap this week:
Earnings: Adobe Systems, Oracle
FOMC meeting begins
Earnings: FedEx, General Mills, Actuant, Williams-Sonoma, Herman Miller, Guess, Renren, Silver Wheaton, Jabil Circuit
7:00 am: Mortgage applications
10:30 am: EIA oil inventory data
2:00 pm: Fed statement
2:30 pm: Fed Chair Janet Yellen press briefing
Earnings: Nike, Lennar, Vince Holding
8:30 am: Initial claims
8:30 am: Current account Q4
10:00 am: Philadelphia Fed survey
Earnings: KB Home, Darden Restaurants, Tiffany