U.S. Stocks Decline for Seventh Day Amid Fed as Election Looms

  • Tighter contest for president puts investors on edge
  • S&P 500 in longest slide in five years as anxiety builds

U.S. stocks fell, with the S&P 500 Index mired in its longest slump in five years, after investors shrugged at the Federal Reserve’s decision to stand pat on interest rates and remained on edge before the U.S. presidential election.

The Fed’s as-expected message did little to temper increasing anxiety over the implications from the Nov. 8 vote, which has begun to dominate market sentiment. Equities are also grappling with mixed earnings reports and a plunge in crude prices that sent oil to a one-month low. Facebook Inc. edged higher in after-hours trading following the social network’s quarterly results.

The S&P 500 Index dropped 0.7 percent to 2,097.94 at 4 p.m. in New York, capping a seventh straight loss to remain near a four-month low. The benchmark closed below 2,100, after briefly dipping beneath the technically sensitive level Tuesday for the first time since July 7. The Dow Jones Industrial Average lost 77.46 points, or 0.4 percent, to 17,959.64, and the Nasdaq Composite Index slid 0.9 percent.

“The FOMC minutes were benign and came in as expected, with the only real change coming as we went from three dissenters to two,” Yousef Abbasi, a global market strategist at JonesTrading Institutional Services LLC, said by phone. “More than anything right now we’re seeing a combination of uncertainty and a lack of motivation to do anything before the election. People are de-risking their books, and in some cases opting to sit on the sideline.”

Wednesday’s retreat came after the S&P 500 fell yesterday by the most in three weeks, amid polls showing Hillary Clinton’s once formidable lead over Donald Trump in the presidential race has withered. That jolted stocks from the tightest trading range since 2006 as investors brace for market turmoil. Just four months removed from the U.K.’s shock decision to leave the European Union in an outcome not predicted by betting markets, anxiety levels have spiked as the election polls have narrowed.

The CBOE Volatility Index remained at its highest since June after spiking more than 48 percent in seven days. The measure of market turbulence known as the VIX extended its streak of gains to the longest since 2013. About 8.1 billion shares traded hands on U.S. exchanges, 25 percent more than the three-month average.

Banks and energy producers were among the biggest drags today as bond yields retreated amid demand for havens, and crude prices sank to the lowest in more than a month. Gilead Sciences Inc. and Allergan Plc fell more than 2.1 percent after both drugmakers’ profits missed estimates. Technology shares were weighed by Google parent Alphabet Inc.’s slide to a three-month low, and as Facebook sank 1.8 percent before its earnings report.

After markets closed, Facebook was little changed as of 4:35 p.m. The company said revenue jumped to a record, boosted by video advertising and sales from Instagram. The results exceeded analysts’ estimates.

Fed Waits

Meanwhile, policy makers said today the case to boost borrowing costs has continued to strengthen, but decided, “for the time being,” to wait for more evidence of progress toward their employment and inflation objectives. The decision to forgo a rate increase had been widely expected owing to the proximity of next week’s election.

The central bank has held the target range for the benchmark fed funds rate at 0.25 to 0.5 percent all year after raising it in December for the first time in nearly a decade. Concerns over slowing global growth and a slide in U.S. inflation expectations have kept them sidelined. Officials last December forecast it would be appropriate to raise rates four times in 2016, their median estimate showed. That projection was cut in March to two moves this year and lowered again in September to just one.

Data today showed companies added fewer workers than forecast in October, signaling slower progress than estimated in the labor market. The government’s monthly payrolls report is due Friday. Following the FOMC decision, traders now price in 80 percent odds on a December increase, compared to 67 percent before the statement was released.

“They’ve done everything they need to do to tee December up,” said Chris Zaccarelli, chief investment officer of Cornerstone Financial Partners, which oversees more than $1 billion in assets in Huntersville, North Carolina. “They’ve all but indicated they’re going to raise rates in December, but they’re leaving a little room in case something unexpected happens with the election or something that sends the market into a tailspin.”

The S&P 500 has advanced the five days before a presidential election in 20 of the past 22 votes, according to data compiled by Bloomberg. The gauge has climbed an average 1.9 percent in the run-up to all elections going back to 1928. It’s down 1.3 percent since Monday, with three trading days left until polls open Nov. 8.

Canaccord Genuity Inc.’s Tony Dwyer upgraded his view of equities to positive from neutral Wednesday. In a note, the co-head of U.S. equity research said the selloff provided a window for active investors to become more aggressive. “While the markets hate uncertainty, in a positive fundamental backdrop, investors should love it because it creates opportunity,” Dwyer said by telephone, highlighting health-care, financials, industrials and technology as groups to consider. “The seasonal history suggests you want to buy any weakness.”

— With assistance by Matthew Boesler, Steve Matthews, and Julie Edde

    Before it's here, it's on the Bloomberg Terminal.