U.S. Stocks Pulling Back Sharply Amid Pre-Fed Jitters

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Stocks have moved sharply lower in morning trading on Tuesday, more than offsetting the late-day advance seen in the previous session. The major averages have all shown significant moves to the downside, pulling back near their lowest intraday levels in two months.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is down 385.21 points or 1.2 percent at 30,634.47, the Nasdaq is down 105.35 points or 0.9 percent at 11,429.67 and the S&P 500 is down 47.65 points or 1.2 percent at 3,852.24.

The pullback on Wall Street comes as traders seem jittery ahead of the Federal Reserve's monetary policy decision on Wednesday.

The Fed is widely expected to raise interest rates by another 75 basis points, although some see an outside chance for a 100 basis point rate hike.

CME Group's FedWatch Tool is currently indicating an 82.0 percent chance of a 75 basis points rate hike and an 18.0 percent chance of a 100 basis point rate hike.

Treasury yields are seeing further upside ahead of the Fed announcement, with the yield on the benchmark ten-year note jumping to a new eleven-year high.

Several of other major central banks around the world are also scheduled to announce their latest monetary policy decisions this week, including the Bank of England and the Bank of Japan.

A notable drop by shares of Ford (F) is also weighing on Wall Street, with the auto giant plunging by 8.5 percent to its lowest intraday level in almost two months,

The pullback by Ford comes after the company warned inflation-related supplier costs during the third quarter will run about $1.0 billion higher than originally expected.

On the U.S. economic front, the Commerce Department released a report showing an unexpected spike in new residential construction in the U.S. in the month of August, although the report also showed a steeper than expected slump in building permits.

Oil service stocks have shown a substantial move to the downside in morning trading, dragging the Philadelphia Oil Service Index down by 3.3 percent.

The sell-off by oil service stocks comes amid a steep drop by the price of crude oil, with crude for October delivery tumbling $2.07 to $83.66 a barrel.

Significant weakness has also emerged among steel stocks, as reflected by the 2.8 percent nosedive by the NYSE Arca Steel Index.

Gold stocks are also seeing considerable weakness amid a modest decrease by the price of the precious metal, resulting in a 2.7 percent slump by the NYSE Arca Gold Bugs Index.

Interest rate-sensitive commercial real estate, housing and utilities stocks have also shown notable moves to the downside, moving lower along with most of the other major sectors.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index jumped by 1.2 percent.

Meanwhile, the major European markets have moved to the downside on the day. While the U.K.'s FTSE 100 Index has slid by 0.8 percent, the German DAX Index is down by 1.1 percent and the French CAC 40 Index is down by 1.4 percent.

In the bond market, treasuries are extending the downward trend seen over the past several weeks. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 10.3 basis points at 3.593 percent.

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