Wall Street ends lower, oil dips as Fed looms

By Stephen Culp

NEW YORK (Reuters) – U.S. stocks closed down on Tuesday and crude prices fell as investors parsed economic data and girded themselves for a series of central bank decisions, including an expected rate cut from the Federal Reserve.

Bitcoin forged new record highs and benchmark U.S. Treasury yields steadied ahead of what is expected to be a “hawkish cut” from the U.S. central bank.

The blue-chip Dow ended in negative territory for the ninth consecutive session, marking its longest losing streak since 1978.

“It’s a respite for most of the market,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest in Elmhurst, Illinois. “The averages are hanging around all-time highs and there’s been a big bifurcation in growth versus value, large versus small. Those themes that we’ve been talking about for the first half of the year are showing up for the last couple trading days of 2024.”

Aside from the Fed, central banks Japan, Britain, Sweden and Norway are all slated to meet this week. The BOJ, the Bank of England and Norges Bank are expected to stand pat, while the Riksbank is seen cutting rates.

Members of the Federal Open Market Committee convened on Tuesday for their two-day monetary policy meeting, which is widely seen culminating on Wednesday with a 25 basis-point cut to the key Fed funds target rate.

Markets will scrutinize the accompanying Summary of Economic Projections, which is expected to temper Fed policy expectations for the coming year in light of sticky inflation and robust economic data.

“We’re getting a cut right now because it’s largely been priced in and (the Fed has) been sort of backed into it by their earlier commitments, and by the market,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

“Going forward, they’re going to be on a pause until more favorable inflation data comes their way,” Pavlik added.

“I’d rather have a hawkish cut than no cut.”

A better-than-expected retail sales report underscored U.S. economic strength, which contrasted with weak retail sales from China, which raised the specter of softening global demand.

The Dow Jones Industrial Average fell 266.93 points, or 0.61%, to 43,450.55, the S&P 500 fell 23.45 points, or 0.39%, to 6,050.63 and the Nasdaq Composite fell 64.83 points, or 0.32%, to 20,109.06.

European stocks fell to two-week lows, weighed down by energy and healthcare stocks ahead of central bank decisions and as downbeat data from China stoked demand concerns.

MSCI’s gauge of stocks across the globe fell 3.86 points, or 0.44%, to 863.98.

The STOXX 600 index fell 0.42%, while Europe’s broad FTSEurofirst 300 index fell 7.75 points, or 0.38%.

Emerging market stocks fell 9.32 points, or 0.84%, to 1,093.89. MSCI’s broadest index of Asia-Pacific shares outside Japan closed lower by 0.63%, to 579.66, while Japan’s Nikkei fell 92.81 points, or 0.24%, to 39,364.68.

Yields on 10-year Treasuries backed away from three-week highs ahead of the Fed’s rate decision and economic projections.

The yield on benchmark U.S. 10-year notes fell 0.4 basis points to 4.395%, from 4.399% late on Monday.

The 30-year bond yield fell 2.6 basis points to 4.5837% from 4.61% late on Monday.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 0.6 basis points to 4.245%, from 4.249% late on Monday.

The dollar inched higher against a basket of world currencies as better-than-expected retail sales data suggested economic momentum as investors digested the likelihood that the Fed would slow its easing to a more gradual pace in the coming year.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.18% to 106.98, with the euro down 0.22% at $1.0487.

Against the Japanese yen, the dollar weakened 0.42% to 153.51.

Bitcoin touched yet another record high, as cryptocurrencies continue to coast on the prospect of a strategic bitcoin reserve proposed by U.S. President-elect Donald Trump.

In cryptocurrencies, bitcoin gained 0.52% to $106,635.28. Ethereum declined 2.83% to $3,933.80.

Oil prices slid amid renewed demand worries in the wake of economic data from Germany and China.

U.S. crude fell 0.89% to $70.08 per barrel, while Brent slid to $73.19 per barrel, down 0.97% on the day.

Gold pulled back under pressure from a strong dollar as investors lowered their expectations for the pace and extent of interest rate cuts in the coming year.

Spot gold fell 0.32% to $2,643.84 an ounce. U.S. gold futures fell 0.48% to $2,638.80 an ounce.

(Reporting by Stephen Culp in New York; Additional reporting by Samuel Indyk in London and Ankur Banerjee in Singapore; Editing by Jan Harvey, Lisa Shumaker and Matthew Lewis)