US open: Stocks fall as investors await Fed interest rate decision

US stocks dropped on Monday as oil prices wavered and investors acted cautious ahead of the Federal Reserve’s interest rate decision.

The Dow Jones Industrial Average fell 0.65%, the S&P 500 shed 0.52% and the Nasdaq lost 0.37% at 1514 BST.

Oil prices were mixed after declines earlier in the session, with West Texas Intermediate crude down 0.32% to $43.59 per barrel and Brent up 0.33% to $45.26 per barrel.

Saudi Arabia has approved economic reforms aimed at moving the country away from its dependence on oil profits. The plan includes selling shares in state-owned Aramco to create a sovereign wealth fund. Oil accounts for nearly 80% of Saudi’s revenue but the slide in prices over the past year has hit the nation’s economy.

Meanwhile, the Fed is widely expected to keep interest rates unchanged on Wednesday but traders will be looking for clues on the central bank’s next policy action.

“We could be in for another rocky week in the markets with particular focus back on the central banks as we get the latest monetary policy decisions from the Federal Reserve and Bank of Japan, the latter of which is expected to announce new stimulus measures,” said Oanda’s Craig Erlam.

He expects two rates hike from the Fed this year. “What the markets are looking for though is an idea of when we can expect them, with the June and December meetings looking the most likely.”

Societe Generale said: “It feels very much like it did back in October 2015, when the Fed started to hint at the possibility of rate hikes at the December meeting, but with one key difference – the probability of rate hikes priced in the fed funds market then was significantly higher than what is currently priced in the market.

“Back in October, the market was pricing in a probability of three hikes in 2016, and now we are pricing in just one hike by end-2017.”

The Bank of Japan is also due to make a policy announcement on Thursday.

In corporate news, shares in Xerox plunged after the company reported a 85% drop in first quarter profit, reflecting higher restructuring charges. The group also issued downbeat guidance for the current quarter and lowered its bottom line outlook for the year.

KKR & Co. slumped after posting a first quarter loss that was worse than analysts’ had anticipated.

Express Scripts Holdings is also due to report earnings after the market closes.

Halliburton was scheduled to post first quarter interims but has delayed its release until next month.

Technology giant Apple is slated to release its results on Tuesday.

In economic data, US new home sales unexpectedly fell in March, marking the third month in a row of declines. Figures released by the Commerce Department showed new home sales dropped 1.5% to an annual rate of 511,000 from an upwardly-revised 519,000. Economists had been expecting a pace of 520,000.

In currencies, the dollar fell 0.45% against the pound, edged down 0.33% against the euro and decreased 0.10% versus the yen.