U.S. stocks lost ground on Monday, with the major indexes closing out a strong month of gains on a weaker foot, as investor focus turned to the Federal Reserve's policy meeting this week.
The central bank is widely expected to raise interest rates by 75 basis points on Wednesday at the conclusion of its two-day policy meeting, but investors will look for any signals the Fed may be considering a deceleration in interest rate hikes in the future.
Hopes the Fed may pull back from its aggressive interest rate hike policy have lifted equities in recent weeks, with the S&P 500 notching a gain of nearly 9% over the past two weeks. The Dow booked its biggest monthly percentage gain since January 1976 and biggest October percentage gain since at least 1900.
Comments from Fed officials after the policy decision as well as labor market data later this week will help shape market expectations for future hikes starting at the December meeting. "It is pretty much a foregone conclusion, it has been almost a 100% probability for at least three weeks now that it would be three-quarters of a point and very little chance that it is going to be more or less than that, but there is always apprehension on the part of everyone just waiting for that to be done," said Randy Frederick, managing director, trading and derivatives, Charles Schwab in Austin, Texas.
"People are going to be digesting what is said on Wednesday about what happens on Dec. 14. My hope is that would be a quarter point. In reality, it is probably going to be half a point, but even that would be a very positive sign for the market."
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