Wall Street fell on Tuesday as central bank policymakers weighed interest rates and the health of the U.S. economy and investors worried about an upcoming vote in Britain on whether to leave the European Union.
It was the fourth straight session of losses for the S&P 500 as the Federal Reserve began its two-day meeting to decide whether the U.S. economy has recovered enough to absorb a rate hike.
While traders have discounted a rate increase this month, they will parse Fed Chair Janet Yellen's speech at a conference on Wednesday for clues on the health of the economy and the trajectory of hikes.
Adding to the uncertainty, recent opinion polls indicated growing support for Britain's exit from the European Union, creating a rush by investors to safe-haven assets like gold and the yen.
The CBOE Volatility index .VIX, or Wall Street's fear gauge, reached its highest in over three months.
"We're trading on the Brexit polls, but couched with fear about what the Fed may or may not do," said John Canally, chief economic strategist for LPL Financial.
Seven of the 10 major S&P sectors were lower, with financials SPSY falling 1.41 percent. The sector, which benefits the most if interest rates are raised, was on track to close lower for the fourth straight session.
JPMorgan (JPM.N) fell 1.69 percent while Citigroup lost 2.57 percent. Both were among top losers on the S&P.
Traders see virtually no chance of a rate hike on Wednesday, according to CME Group's FedWatch tool. They are pricing in a 21 percent chance of a rate hike in July, a 40 percent chance in September and a 59 percent chance in December.
"The focus will be on the number of hikes Federal Reserve participants see through the year," said Bill Northey, chief investment officer at Private Client Group of U.S. Bank.
The Nasdaq Composite .IXIC dropped 0.39 percent to 4,829.40.
One bright spot was a better-than-expected 0.5 percent rise in U.S. retail sales in May.
Declining issues outnumbered advancing ones on the NYSE by 2,137 to 860. On the Nasdaq, 1,860 issues fell and 923 advanced.
The S&P 500 index showed 11 new 52-week highs and six new lows, while the Nasdaq recorded 20 new highs and 71 new lows.
(Additional reporting by Ann Saphir in San Francisco and Yashaswini Swamynathan in Bengaluru; Editing by Meredith Mazzilli)
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Updated Date: Jun 15, 2016 00:45 AM