Wall Street fell as investors eyed the Federal Open Market Committee which started its two-day meeting today but will have to wait until tomorrow to find out if there will be an easing this month of the central bank's pace of bond-buying.
In afternoon trading in New York, the Dow Jones Industrial Average slipped 0.05 per cent, the Standard & Poor's 500 Index fell 0.35 per cent, while the Nasdaq Composite Index declined 0.20 per cent. Shares of Verizon Communications fell, as did those of IBM, leading the decliners in the Dow.
"There are so many people watching the Fed's decision, so much money on the edge," Sam Wardwell, an investment strategist at Pioneer Investments in Boston, told Bloomberg News. "Everybody knows the Fed is going to taper sooner or later. The question is, are people putting on too many short positions, or not enough short positions? This is everybody betting on the outcome so the market is going to be volatile."
The Consumer Price Index was steady in November, following a 0.1 per cent decline in October, according to Labor Department data. In the 12 months through November, the CPI increased 1.2 per cent.
"If the Fed wanted an excuse to continue with the full bond purchases they could use the inflation numbers," Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh, told Reuters. "But given the strength in what we have seen in the labour market and in other economic indicators, I think they do want to reduce their purchases."
Separately, confidence among American home builders grew more than expected in December. The National Association of Home Builders/Wells Fargo Housing Market Index rose to 58, up from 54 in November.
"This is definitely an encouraging sign as we move into 2014," NAHB Chairman Rick Judson, a home builder from Charlotte, NC, said in a statement. "The HMI is up 11 points since December of 2012 and has been above 50 for the past seven months. This indicates that an increasing number of builders have a positive view on where the industry is going."
Investors lapped up the US Treasury's auction of two-year notes.
The notes drew a yield of 0.345 per cent, compared with a forecast of 0.349 per cent in a Bloomberg News survey of seven of the Fed's 21 primary dealers. The bid-to-cover ratio was 3.77, the highest since January, compared with an average of 3.26 for the past 10 sales.
Shares of KKR Financial Holdings soared, last up 28.6 per cent, a day after KKR & Co said it would buy KKR Financial Holdings in a US$2.6 billion deal.
In Europe, the Stoxx 600 Index shed 0.7 per cent from the previous close. The UK's FTSE 100 fell 0.6 per cent, while France's CAC 40 sank 1.2 per cent.
Better-than-expected German investor confidence data failed to lift the mood for the country's benchmark equity index. The DAX gave up 0.9 per cent.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations climbed to 62 this month, up from 54.6 in November