Stocks declined on Tuesday due to investors' uncertainty whether the Federal Reserve will announce action to boost the U.S. economy as the recovery appears to be losing steam.
In addition, evidence that China's rapid growth is easing added to bearish sentiment, helping the benchmark S&P 500 index <.SPX> to dip below its 200-day moving average.
The news about weaker-than-expected Chinese imports left commodity and energy stocks among the biggest decliners, with the S&P materials index <.GSPM> down 1.6 percent.
Aluminum company Alcoa Inc
But a major focus has been speculation whether the Fed will signal it is prepared to place more money in circulation to aid a faltering U.S. economic recovery. The Fed's policy-making committee, which is meeting, is due to release a statement around 2:15 p.m. EDT.
It seems (investors) were hoping the Fed would implement some more quantitative easing, and it almost seems like the market is giving up on that possibility, said Charles Lieberman, chief investment officer of Advisors Capital Management, LLC in Hasbrouck Heights, New Jersey.
I don't think quantitative easing is particularly likely, but it is possible. It seems a little premature for the Fed in my mind.
The Dow Jones industrial average <.DJI> was down 92.11 points, or 0.86 percent, at 10,606.64. The Standard & Poor's 500 Index <.SPX> was down 11.44 points, or 1.01 percent, at 1,116.35. The Nasdaq Composite Index <.IXIC> was down 32.80 points, or 1.42 percent, at 2,272.89.
Lieberman said the Fed is more likely to take a wait-and-see mode and look for signs that the recovery is either weakening further or regaining momentum.
Investors are bracing for a number of scenarios: While more easy money from the Fed could encourage investors to buy stocks, a more cautious forecast from the central bank, whose outlook has still been for a moderate recovery, may heighten concerns that the economic growth may be deteriorating.
A mere acknowledgment of an economic blip might disappoint investors, who have been betting the Fed would make a more concrete move, such as buying bonds to pull down market rates.
The market has increased speculation the Fed could act to revive the economy since Friday's weaker-than-expected jobs report for July. Stocks closed higher on Monday.
U.S. data showed non-farm productivity unexpectedly dropped in the second quarter, the first decline since late 2008, adding selling pressure on equities.
The S&P 500 energy index <.GSPE> was off 1.2 percent.
(Reporting by Caroline Valetkevitch; Additional reporting by Angela Moon; Editing by Kenneth Barry)