Wall Street down as oil prices slide; Fed meet in focus

By Yashaswini Swamynathan and Tanya Agrawal

REUTERS - U.S. stocks drifted lower on Tuesday as oil prices fell for the sixth straight day and investors held off from making big bets ahead of a widely expected interest rate hike.

Trading volumes were light as a blizzard in the northeastern United States grounded flights and kept people indoors. Shares of airline stocks, including United Continental and American Airlines, took a hit.

Oil prices slid to three-month lows after OPEC reported a rise in global crude stocks and a surprise jump in production from its biggest member, Saudi Arabia, despite a deal to curb supply. [O/R]

The S&P energy sector was down 1.4 percent, trading close to its lowest level since Nov. 7. Chevron was off 1.4 percent and was the biggest drag on the Dow and the S&P 500.

The Fed meets over two days, starting Tuesday, with traders pricing in a 90 percent chance of a quarter point rate hike as inflation picks up and the labor market shows solid strength.

The central bank's statement is due at 2:00 p.m. ET on Wednesday, followed by Fed Chair Janet Yellen's press conference.

The Fed's interest rate outlook for the year will be in focus, especially as markets are betting on a potential economic boost from President Donald Trump's proposed fiscal policies.

"It's a foregone conclusion that the Fed will raise rates, but there is an expectation that the central bank may raise their expectation from three hikes this year to four," said Michael Scanlon, portfolio manager at Manulife Asset Management in Boston.

Wall Street's top banks were unanimous on the view the Fed would raise rates at its policy meeting, a Reuters poll showed on Friday.

At 12:34 p.m. ET (1634 GMT), the Dow Jones Industrial Average was down 54.03 points, or 0.26 percent, at 20,827.45, the S&P 500 was down 11.37 points, or 0.48 percent, at 2,362.1 and the Nasdaq Composite was down 31.28 points, or 0.53 percent, at 5,844.51.

All of the 11 major S&P sectors were lower, with the energy sector leading the decliners.

Valeant plunged 10 percent to $10.87 after billionaire investor William Ackman said his hedge fund, Pershing Square Capital, sold its entire stake in the company.

Declining issues outnumbered advancers on the NYSE by 2,155 to 707. On the Nasdaq, 2,055 issues fell and 678 advanced.

The S&P 500 index showed 11 new 52-week highs and four new lows, while the Nasdaq recorded 41 new highs and 55 new lows.

(Reporting by Yashaswini Swamynathan and Tanya Agrawal in Bengaluru; Editing by Anil D'Silva & Shri Navaratnam)