By Stephen Culp
NEW YORK (Reuters) -U.S. stocks followed their European counterparts lower on Tuesday and crude prices fell as investors parsed economic data and girded themselves for a series of central bank decisions, including an expected rate cut from the Federal Reserve.
Bitcoin forged new record highs and benchmark U.S. Treasury yields steadied ahead of what is expected to be a "hawkish cut" from the U.S. central bank.
"There's profit taking ahead of the Fed meeting," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "Markets have had an extremely strong run and it’s probably gotten a little frothy."
"And with this morning’s strong retail sales report, expectations for further rate cuts have been diminished after tomorrow," Pavlik added.
Aside from the Fed, central banks Japan, Britain, Sweden and Norway are all slated to meet this week. The BOJ, the Bank of England and Norges Bank are expected to stand pat, while the Riksbank is seen cutting rates.
Members of the Federal Open Market Committee are due to convene on Tuesday for their two-day monetary policy meeting, which is widely seen culminating on Wednesday with a 25 basis point cut to the key Fed funds target rate.
Markets will scrutinize the accompanying Summary of Economic Projections (SEP), which is expected to temper Fed policy expectations for the coming year in light of sticky inflation and robust economic data.
"We're getting a cut right now because it's largely been priced in and (the Fed has) been sort of backed into it by their earlier commitments, and by the market," Pavlik said.
"Going forward, they're going to be on a pause until more favorable inflation data comes their way."
"I’d rather have a hawkish cut than no cut."
A better-than-expected retail sales report underscored U.S. economic strength, which contrasted with weak retail sales from China, which raised the specter of softening global demand.
The Dow Jones Industrial Average fell 239.15 points, or 0.55%, to 43,478.33, the S&P 500 fell 29.83 points, or 0.49%, to 6,044.23 and the Nasdaq Composite fell 115.04 points, or 0.57%, to 20,058.85.
European stocks hit two-week lows, weighed down by energy and healthcare stocks as central bank decisions loomed and downbeat data from China stoked demand concerns.
MSCI's gauge of stocks across the globe fell 4.38 points, or 0.50%, to 863.46.
The STOXX 600 index fell 0.3%, while Europe's broad FTSEurofirst 300 index fell 5.61 points, or 0.27%.
Emerging market stocks fell 10.11 points, or 0.92%, to 1,093.10.
MSCI's broadest index of Asia-Pacific shares outside Japan closed lower by 0.62%, to 579.69, while Japan's Nikkei fell 92.81 points, or 0.24%, to 39,364.68.
Yields on 10-year Treasuries backed away from three-week highs ahead of the Fed's rate decision and economic projections.
The yield on benchmark U.S. 10-year notes fell 1.2 basis points to 4.387%, from 4.399% late on Monday.
The 30-year bond yield fell 2.6 basis points to 4.5837% from 4.61% late on Monday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 0.8 basis points to 4.241% from 4.249% late on Monday.
The dollar steadied against a basket of world currencies as investors digested the likelihood that the Fed will lower its policy rate at a more gradual pace in the coming year.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.11% to 106.91, with the euro down 0.12% at $1.0497.
Against the Japanese yen, the dollar weakened 0.4% to
153.54.
Bitcoin hit yet another record high in advance of what many expect to be a "hawkish cut" from the Fed, as cryptocurrencies continue to coast on the prospect of a strategic bitcoin reserve proposed by U.S. President-elect Donald Trump.
Bitcoin gained 0.46% to $106,575.00. Ethereum declined 2.3% to $3,955.00.
Oil prices retreated amid renewed demand worries in the wake of economic retail sales data from China.
U.S. crude fell 1.95% to $69.33 a barrel and Brent slid to $72.58 per barrel, down 1.8% on the day.
Gold retreated as investors lowered their expectations for the pace and extent of interest rate cuts in the coming year in view of strong economic data and stubbornly high inflation.
Spot gold fell 0.57% to $2,637.31 an ounce. U.S. gold futures fell 0.48% to $2,638.80 an ounce.