Weak results drag on tech stocks; dollar drops before Fed

By Dion Rabouin

NEW YORK (Reuters) - Disappointing results from Apple and Twitter hurt world technology stocks on Wednesday, while the U.S. dollar weakened ahead of a policy announcement by the Federal Reserve, pushing oil prices to 2016 highs.

Apple shares slumped 7 percent in early trading after the company reported its first drop in iPhone sales and its first decline in revenue in more than a decade on Tuesday. Twitter tumbled more than 15 percent after first-quarter revenue lagged expectations.

The Nasdaq's information technology sector fell 1.75 percent, with Facebook and Alphabet also lower.

Wall Street was lower in early trading ahead of the Fed decision.

The Dow Jones industrial average fell 62.18 points, or 0.35 percent, to 17,928.14, the S&P 500 lost 7.98 points, or 0.38 percent, to 2,083.72 and the Nasdaq Composite dropped 53.88 points, or 1.1 percent, to 4,834.41.

European shares eked small gains, with advances at sportswear group Adidas and British bank Barclays helping shake off a retreat in tech stocks.

The pan-European FTSEurofirst 300 index rose 0.1 percent, while the euro zone's blue-chip Euro STOXX 50 index advanced 0.2 percent.

A gauge of global equity markets fell 0.35 percent, with Japan's Nikkei index and Chinese markets down around 0.4 percent.

RATE DECISION

The dollar fell 0.2 percent against a basket of currencies as investors waited for a Federal Reserve decision on U.S. interest rates at 2 p.m. EST (1800 GMT).

The Fed is expected to leave rates unchanged as it continues to monitor the impact from weakening global growth, but some analysts said the central bank could alter its language to highlight reduced global risks.

"The markets are setting up for a pretty dovish statement after this Fed meeting," said Chris Gaffney, president of EverBank World Markets in St. Louis. He said the risk of a hawkish tweak to the Fed's language was limiting the greenback's losses in the morning session.

Economists polled by Reuters expect two rate increases this year, although futures prices show traders do not expect rates to rise until late in the year, according to CME Group's FedWatch. Higher U.S. rates generally boost the dollar by driving investment flows into the United States.

The Australian dollar was the biggest mover among currencies, falling more than 2 percent to $0.7581 after data showed that core inflation unexpectedly slowed to its lowest on record in the first quarter.

The Aussie is on track for its biggest one-day fall in three months, reviving talk the Reserve Bank of Australia could cut the record-low 2 percent cash rate at its May policy meeting next week.

"The inflation data clearly puts an interest rate cut back on the table quite firmly," said Rabobank currency strategist Jane Foley in London.

The dollar resumed its fall against the yen and euro, dipping 0.15 percent against the Japanese currency and 0.25 percent against the euro.

The weaker dollar helped lift crude futures to 2016 highs in early trading, but oil gave back most of its gains after the Energy Information Administration reported U.S. crude stocks rose last week to a fresh record high.

Brent crude, the international benchmark, was last up 15 cents to $45.83 a barrel. U.S. crude fell 9 cents to $44.10 a barrel.

Benchmark U.S. 10-year government notes were up 10/32 in price with a yield of 1.893 percent, as Treasury prices clung to earlier gains.

(Additional reporting by Sam Forgione in New York and Nigel Stephenson in London; Editing by Bernadette Baum)