By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) -- The U .S. equity market opened lower
on Tuesday, as investors remained risk averse and avoided tech and
small-cap stocks.
The Federal Open Market Committee's two-day policy meeting
begins Tuesday morning and many worry the policy makers will take a
hawkish stand on interest rates. Also read: Eight keys to Fed's
September meeting
The S&P 500 (SPX) opened 4 points, or 0.2%, lower at
1,980.
The Dow Jones Industrial Average (DJI) began the day down 38
points, or 0.2%, at 16,998.
The Nasdaq Composite (RIXF) dropped 15 points, or 0.4%, to
4,480, adding to sharp losses from the previous session.
Follow today's stock market coverage on our live blog.
In economic news, producer prices were flat in August thanks to
falling gasoline and food costs, another sign that inflationary
pressure is receding. It was the lowest reading in the producer
price index since December, the Labor Department reported.
Tech and small-cap stocks led a mostly losing day on Wall Street
on Monday, with the Nasdaq Composite (RIXF) dropping 1.07% as
investors turned risk-averse ahead of the Fed meeting. Analysts are
looking for a change in the Fed's language that could signal
sooner-than-expected rate hikes.
Global Head of Asset Allocation at Societe Generale Alain
Bokobza and his team advised investors to "switch out of expensive,
illiquid and over-owned assets" like small-cap stocks and into
large-cap equities in Europe and the U.S. "As the Fed continues to
normalize its monetary policy, small caps are at risk of a large
correction," he said. Read Need to Know: A dearth of deep-value
plays
Data compiled by Bloomberg News showed 47% of stocks in the
Nasdaq Composite are down at least 20% from their peak in the past
12 months, and more than 40% of Russell 2000 (RUT)members have
fallen by as much. Meanwhile, the S&P 500 index has logged 33
new closing highs this year, and fewer than 6% of companies have
entered what is considered bear-market territory, Bloomberg
reported Monday.
Stocks to watch: Majesco Entertainment Co. (COOL) fell 14% after
a similar drop late Monday when the video-game maker posted a
larger-than-expected third-quarter loss.
Tesla Motors Inc. (TSLA) rose modestly after falling hard Monday
on a Morgan Stanley note that said the electric-car maker's stock
is overvalued. But Trip Chowdhry at Global Equities Research
advised in a note Tuesday that investors buy Tesla on weakness, as
he reiterated an overweight rating and a 12-to-18-month price
target of $385. (Read more about the day's notable movers here:
http://www.marketwatch.com/story/adobe-factset-earnings-in-spotlight-2014-09-16.)
Other markets:Asian stocks largely fell. China's largest
wireless carrier China Mobile Ltd. tumbled 3.8% at the close, after
reports said the release date for iPhone 6 in mainland China is
still uncertain. Data out of China also showed that in August
foreign direct investment fell to a four-year low. This followed
weak factory data released over the weekend.
A disappointing German economic sentiment survey put pressure on
already weak European stocks . Worries about this week's Scottish
referendum continued to dull markets, also weighing some on U.S.
stock futures.
Among currencies, the Russian ruble (USDRUB) continued to fall
against the U.S. dollar, off another 1% as sanctions worries
weighed. Gold(GCZ4) edged up on the heels of Monday's first win in
five sessions.(RUT)
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