U.S. Stocks Moving Moderately Lower Ahead Of Fed Announcement

Stocks have moved moderately lower in morning trading on Wednesday, extending the sharp pullback seen over the two previous sessions. The major averages have all moved to the downside, further offsetting the strong gains posted last week.

Currently, the major averages are off their lows of the young session but still in negative territory. The Dow is down 120.20 points or 0.3 percent at 35,423.98, the Nasdaq is down 64.92 points or 0.4 percent at 15,172.72 and the S&P 500 is down 10.27 points or 0.2 percent at 4,623.82.

The continued weakness on Wall Street comes as traders look ahead to the Federal Reserve’s highly anticipated monetary policy announcement this afternoon.

With recent data showing inflation at persistently elevated levels, Fed is widely expected to accelerate its timetable for reducing bond purchases.

Reports suggest the Fed could double the rate it is reducing its asset purchases to $30 billion per month from the $15 billion per month announced at its previous meeting in November.

Many traders expect the Fed to begin raising interest rates shortly after bringing its asset purchase program to a halt next year.

Concerns the Fed may be scaling back stimulus at a time economic growth is slowing may be weighing on the markets after the Commerce Department released a report showing retail sales rose by much less than expected in November.

The Commerce Department said retail sales edged up by 0.3 percent in November after soaring by an upwardly revised 1.8 percent in October.

Economists had expected retail sales to increase by 0.8 percent compared to the 1.7 percent spike originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales still rose by 0.3 percent in November after surging by 1.8 percent in October. Ex-auto sales were expected to jump by 1.0 percent.

Oil service stocks are extending a recent downward trend in morning trading, dragging the Philadelphia Oil Service Index down by 3.5 percent.

The continued weakness in the sector comes amid a steep drop by the price of crude oil, with crude for January delivery slumping $1.12 to $69.63 a barrel.

Substantial weakness has also emerged among steel stocks, as reflected by the 3.0 percent nosedive by the NYSE Arca Steel Index.

Airline, oil producer and gold stocks are also seeing considerable weakness, while Eli Lilly (LLY) is leading an advance by pharmaceutical stocks after providing upbeat guidance.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index inched up by 0.1 percent, while China’s Shanghai Composite Index fell by 0.4 percent.

The major European markets have also turned mixed on the day. While the U.K.’s FTSE 100 Index is down by 0.6 percent, the German DAX Index is up by 0.1 percent and the French CAC 40 Index is up by 0.3 percent.

In the bond market, treasuries have climbed back near the unchanged line after seeing early weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 1.439 percent.

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