Wall Street dips as investors edgy ahead of Fed meet

By Tanya Agrawal

(Reuters) - U.S. stocks shed earlier gains to trade lower in choppy trading on Wednesday as investors awaited a Federal Reserve statement that could provide hints on the timing of a rate hike.

All three major indexes were lower for the month.

Investors will scour the statement - due at 2:00 p.m. ET (1800 GMT) - for any signs of when the Fed is likely to begin raising interest rates and the pace of any subsequent hikes.

The Fed statement will be followed by Chair Janet Yellen's news conference half an hour later. Analysts expect her to focus on signs the economy is recovering after a bumpy start to the year.

 

The Fed has said it will raise rates only when economic data points to a sustained recovery. The U.S. economy is on track to grow 1.9 percent in the second quarter, according to the Atlanta Federal Reserve's GDPNow forecast model.

Many investors expect the Fed to signal that U.S. borrowing rates will be increased in September.

"The Fed will send out another message which lays down the groundwork for a rate rise in August or September," said Andrew Barber, chief market strategist at Eagleview Capital in Delaware.

"The market is expecting a rate rise this year and it won't change a thing from an investment standpoint. It is much ado about nothing."

Stocks are around record highs, helped by the Fed's easy monetary policy, but have traded in a narrow range this year as investors look for more clarity on what could be the first rate hike since June 2006.

Applications for U.S. home mortgages fell last week as interest rates rose to their highest since October 2014, an industry group said on Wednesday. Mortgage application activity, which includes both refinancing and home purchase demand, fell 5.5 percent in the week ended June 12.

Greece's debt woes continued to weigh on investors. Athens needs funds to avoid defaulting on a $1.8 billion debt repayment to the International Monetary Fund on June 30, which could drive it out of the euro zone.

At 12:52 p.m. ET the Dow Jones industrial average was down 41.68 points, or 0.23 percent, at 17,862.8, the S&P 500 was down 5.63 points, or 0.27 percent, at 2,090.66 and the Nasdaq Composite was down 9.52 points, or 0.19 percent, at 5,046.04.

All the 10 major S&P 500 sectors were lower, with the telecommunications <.SPLRCU> and energy indexes leading the declines with a 0.5 percent and 0.4 percent drop, respectively.

Apple's 0.5 percent fall weighed the most on the S&P and the Nasdaq, while UnitedHealth was the biggest drag on the Dow with a 0.9 percent decline.

Kythera Biopharmaceuticals' shares rose 22.2 percent to $74.18 after the company said it will be bought by Allergan in a cash-and-stock deal valued at $2.1 billion. Allegran was little changed at $298.02.

FedEx fell 3.4 percent to $175.87 after the package delivery firm reported a quarterly net loss weighed by pension costs, a stronger dollar and lower fuel surcharges.

Declining issues outnumbered advancers on the NYSE by 1,951 to 1,024. On the Nasdaq, 1,496 issues fell and 1,171 rose.

Fifteen stocks hit a 52-week high and three new lows; the Nasdaq Composite was recording 127 new highs and 23 new lows.

(Editing by Don Sebastian)