US open: Stocks fall ahead of EU referendum, Fed rate decision

At 1518 BST the Dow Jones Industrial Average dropped 0.33%, the S&P 500 slid 0.28% and the Nasdaq dipped 0.15%.

Polls this week showing a growing support for Brexit ahead of the 23 June referendum have weighed on investor sentiment.

According to the latest YouGov poll, published in The Times on Tuesday, support for Brexit jumped by three percentage points to 46% over the latest week, while backing for ‘Remain’ lost another three percentage points to 39%.

Oil prices were lower on Brexit worries with West Texas Intermediate crude down 1.17% to $48.34 per barrel and Brent down 1.2% to $49.71 per barrel at 1557 BST.

With uncertainty surrounding the EU referendum and weak employment data for May, analysts see the Federal Reserve leaving interest rates at 0.50% on Wednesday at the policy meeting.

Fed chair Janet Yellen on 6 June said the federal funds rate will need to rise “gradually over time” but was silent on the timing of an interest rate hike. Her dovish tone was viewed as a signal that a June rate hike was off the table.

Rabobank said it revised its expectations for the next rate hike to September, instead of June as previously estimated, following Yellen’s remarks and the much worse-than-forecast non-farm payrolls report released on 3 June.

“After the Fed had finally convinced the markets that it was serious about hiking in June/July, the markets are now again pricing in at most one hike this year and not before December (50.1% priced in according to fed funds futures),” Phil Marey, senior US strategist at Rabobank, said.

Meanwhile, a better-than-expected report on US retail sales failed to lift spirits. The Commerce Department said sales rose 0.5% from the previous month versus expectations of a 0.3% gain.

A measure of small-business sentiment rose in May, according to the National Federation of Independent Business. The optimism index climbed 0.2 point to 93.8, beating forecasts of 93.5.

US business inventories rose 0.1% in April after a downwardly revised 0.3% in March, missing estimates for a 0.2% increase.

On the corporate front, Revance Therapeutics tumbled after saying on Monday that a late-stage clinical study of its crow’s-feet treatment did not reach its main goal.

Baidu Inc. gained even after it cut its quarterly revenue forecast late Monday, citing lower medical advertising on tighter regulation in China.