US open: Stocks slide as Fed rate decision nears

US stocks declined as oil prices plunged and investors were wary ahead of an expected interest rate hike by the Federal Reserve next week.

At 1517 GMT, the Dow was down 1.22%, the Nasdaq was 1.07% weaker and the S&P 500 was off 1.10%.

West Texas Intermediate fell 2.4% to $35.59 per barrel while Brent crude reached a seven-year low, down 2.9% to $38.59 at 1516 GMT.

The further oil slump came as the International Energy Agency said it sees the global market as oversupplied until late 2016. The IEA said the global oil glut was set to worsen in the months ahead as demand slows and OPEC output booms.

In the US, investors were cautious ahead of the Fed's interest rate decision on 16 December, with many analysts pricing in a 25 basis point rise.

Elsewhere, China’s central bank signalled its intention to loosen its peg on the yuan to the US dollar and instead let it track the currencies of its broader trading partners.

US data

US retail sales rose 0.2% month-on-month in November to $448.1bn, according to the Department of Commerce, missing analysts’ forecasts of 0.3%.

The modest gain was partly due a drop in gasoline station sales and in the value of motor vehicle sales. Excluding gas, autos and building materials, retail sales grew 0.6%.

“All things considered, the November retail sales report reaffirms our view that real consumption will be around 2.5% annualised in the fourth quarter,” said Steve Murphy, US economist at Capital Economics.

US business inventories were flat in October, missing analysts’ expectations for a 0.1% increase, the Department of Commerce revealed in a separate report.

The University of Michigan’s preliminary estimate on the consumer confidence index rose to 91.8 in December from 91.3 in November, below estimates for a reading of 92.

The growth in confidence was attributed to households at the bottom two-thirds of the income ladder and took the yearly average to 92.9, which was the highest level since 2004.

"We feared a weaker reading, following the decline in the Bloomberg consumer comfort index, so we are quite relieved by
this report," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"For the Fed, the aggregate is what counts, and we see nothing here to change our view that both total spending and employment will continue to rise at a robust pace."

Companies

Alibaba slumped on news it has agreed to buy the South China Morning Post and other media assets of SCMP Group Limited for an undisclosed sum.

Chipotle Mexican Grill gained after its chief executive apologised on national television for the company’s food safety crisis and said the group was evaluating its procedures.

Dow Chemical and DuPont both tumbled after they agreed to a merger that will create a combined company with a market capitalisation of around $130bn.

Adobe Systems jumped after the software company posted better-than-expected quarterly results late on Thursday.

GoPro reversed Thursday’s gains after speculation the camera company could be targeted by Apple for acquisition.

Meanwhile, the US dollar declined against major currencies. It was down 0.33% against the pound, down 0.34% against the yen and down 0.32% against the euro. Spot gold rose 0.41% to 1,075 per ounce.