USA stocks drop ahead of Fed meeting, Apple results

The Fed is not seen raising rates at the two-day meeting but investors will scrutinize its statement on Wednesday for a bearing on when it will pull the trigger.

Investors are now predicting a 6% chance of rates increasing at this week’s meeting, and a 39% chance of a hike in December.

“I don’t think it’s anything more than an early morning breather after a nice surge in equities”, said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of September.

Tyson was also hit by a downgrade from JPMorgan Chase that warned that lofty meat supplies would depress commodity prices.

Technology stocks lead rally that leaves the S&P 500 positive for the year.

The markets were fractionally up on Monday on a strong housing market index report, which points to acceleration in new home construction. The dollar (http://www.marketwatch.com/story/dollar-slips-as-investors-cash-in-on-recent-gains-2015-10-26) was pulling back against the yen as investors cashed in on recent gains.

On the earnings front, Apple ( AAPL ), Chevron ( CVX ), DuPont ( DD ), Exxon Mobil (XOM), Merck (MRK), Pfizer (PFE), and Twitter (TWTR) are among the companies due to report their quarterly results later this week.

Valeant Pharmaceuticals sank almost 14 percent to $100.50. The company said it would set up a panel to probe allegations about its associations with specialty pharmacy distributor Philador. Among the top Nasdaq gainers, shares of Ctrip.com were up 22.1 per cent at $90.78 after the online travel firm said it would merge with Qunar Cayman Islands.

Pep Boys jumped 23 per cent to a more than three-year high after Bridgestone agreed to buy the auto parts and maintenance chain for about $US835 million.

Piedmont Natural Gas, which distributes natural gas in three southern states in the USA, jumped 37.0 per cent on news it will be acquired by Duke Energy $4.9 billion. The Dow fell fractionally to 17,219; the S&P 500 dropped fractionally to 2,031. During the session, NYSE declining issues outnumbered advancers 1,916 to 1,153, for a 1.66-to-1 ratio; on the Nasdaq, 1,749 issues fell and 1,077 advanced, for a 1.62-to-1 ratio favoring decliners.

Hormel Food fell 1.0 per cent, Pilgrim’s Pride 1.9 per cent and Tyson Foods 4.9 per cent.

Japan’s Nikkei Stock Average closed up 0.7 per cent, while the Shanghai Composite Index was up 0.5 per cent, boosted by the further loosening of monetary policy in China, which was announced after markets closed Friday.