US open: Stocks lower as Fed kicks-off two-day policy meeting

US stocks traded lower as the Federal Reserve kicked-off its two-day policy meeting on Tuesday, while a fall in oil prices hit energy shares.

Acting as a backdrop, blizzard Stella has descended on the East Coast but would not force the Fed to cancel its policy meeting, although it threatened to cut trading volumes in New York as a state of emergency was declared in the Big Apple.

At 1540 GMT, the Dow Jones Industrial Average was down 0.17% to 20,846.95, the S&P 500 fell 0.39% to 2,364.29 and the Nasdaq was 0.49% weaker at 5,847.03.

In currency markets, the dollar was up 0.54% against the pound to 0.8229 and rose 0.15% versus the euro to 0.9401, but was down 0.17% against the yen to 114.68.

Investors were pricing in a likely 25 point basis point hike by the Fed on Wednesday to between 0.75% and 1% and were keen for signals on when the central bank’s next rate hike might arrive.

Markets have currently priced in a 60% chance of three rate hikes this year and this could increase if there are some hawkish comments from Fed chair Janet Yellen.

Analysts at Oxford Economics expect this week's likely hike will be the first of three 25 basis points rises this year, with the target Fed funds rate range expected to end 2017 at 1.25% to 1.5%.

The think-tank forecast US GDP growth will accelerate to 2.1% this year from 1.6% in 2016, while healthy employment and firmer wage growth should support consumer spending but dearer inflation will eat into real disposable income. Business investment should firm, it said, supported by a gradual turnaround in global activity and rebounding manufacturing activity, and trade flows should improve.

Nevertheless, net trade will drag on growth due to a still-strong dollar and modest global growth.

Oxford Economics said the Fed's 2% inflation mandate is well within reach and it expects core inflation will gradually accelerate this year from its 1.7% year-on-year pace in January as the economy gains momentum and President Donald Trump's anticipated fiscal stimulus plan boosts activity toward the end of 2017.

The Fed will release its statement and new economic forecast on Wednesday at 1800 GMT followed by a press conference by Yellen.

Elsewhere, Trump postponed a trip by German Chancellor Angel Merkel to Washington in the last minute due to the snowstorm. The two leaders will now meet on 17 March.

The snowstorm also weighed on airline stocks following thousands of cancelled flights. American Airlines was down 2.21%, United Airlines was 3.08% weaker and Delta Air Lines fell 1.71%.

Meanwhile, oil prices continued their decline on Tuesday, sending energy stocks lower with Marathon Oil down 4.42%, Transocean fell 2.06%, Chevron 1% weaker and ExxonMobil slipping 0.38%.

West Texas Intermediate was down 1.78% to $47.55 a barrel and Brent crude was 1.1% weaker at $50.79.

On the data front, US producer prices grew 0.3% in February month-on-month, more than the consensus forecast of 0.1%. Energy costs rose 0.6% and food prices were 0.3% higher.

Producer prices were 2.2% higher than February 2015, below the 1.9% consensus and more than the 1.6% reading in January.

In other corporate news, Valeant Pharmaceuticals slumped 11.76% after Bill Ackman’s Pershing Square Capital Management said it sold its 10% stake in the company.

Automation software group Synopsys was 2.05% lower despite news that it will enter the S&P 500 later this week.