The S&P 500 edged lower, as interest-rate-sensitive stocks sold off late in the session and offset gains among shares of oil-and-gas companies.
The corners of the stock market sensitive to rising interest rates were among the worst performers ahead of Wednesday's Federal Reserve meeting. Utility stocks, which are viewed as a bond proxy because of the relatively high dividends they pay, sank 1.2% in the S&P 500 — more than any other industry group.
Shares of consumer-staples and financial stocks, both of which also tend to move based on interest-rate expectations, slid in afternoon trading as well.
Those losses offset another strong day for energy stocks, which have rallied 10 of the past 11 trading days. The sector's latest leg of gains followed the Organization of the Petroleum Exporting Countries' decision to stick to current production quotas.
The Fed is largely expected to raise interest rates Wednesday and again in December for a total of four increases this year. Rising rates tend to reduce appetite for high-yielding, less risky stocks as investors can find better premiums in other asset classes, such as bonds.
The real focus is likely to be on any clues on how the central bank plans to proceed with next year's pace of increases as well as its view of the U.S. economy, especially with the continuing trade dispute running in the background.
“With a rate hike all but priced in, markets will be focused on the policy path in 2019 and any sign of changes in inflation expectations,” said John Lynch, chief investment strategist for brokerage firm LPL Financial. “Any change in the Fed's view of inflation could roil markets,” Mr. Lynch said, adding upbeat U.S. economic data should keep the Fed on course for now.
The S&P 500 slid 3.81 points, or 0.1%, to 2915.56 to notch its third consecutive decline, while the Dow Jones Industrial Average shed 69.84 points, or 0.3%, to 26492.21. The Nasdaq Composite, meanwhile, rose 14.22 points, or 0.2%, to 8007.47.
The S&P 500's minor move extended the broad index's run without a 1% move up or down to 64 trading sessions, back to late June. The pullback in big market swings coincides with investors' nervousness about the continuing trade dispute, the Fed's rate-increase path beyond this year and the fact that the 9½-year stock-market rally is the longest ever.
Trading saw nearly all the utility stocks in the S&P 500 fall, with electricity provider Southern Co. down $1.10, or 2.5%, to $42.73, putting it among the sector's worst performers. Bank and other financial stocks in the broad index declined 0.4%, while consumer staples, which also tend to pay relatively big dividends, fell 0.7%.
Semiconductor stocks also weighed on major indexes. The industry, already bruising from the trade fight, got another dose of bad news after a Raymond James analyst lowered his rating on shares of Intel to “underperform” from “market perform,” citing delays in chip production, and cut his outlook on several rivals.
Intel's stock fell a dollar, or 2.1%, to 45.91, while the PHLX Semiconductor Index, which tracks the shares of 30 chip makers, slumped 1.7%. Early Wednesday, Japan's Nikkei Stock Average was down 0.3%, Hong Kong's Hang Seng Index was up 0.6% and the Shanghai Composite Index was up 0.2%.
— David Hodari contributed to this article.
Shares of utilities and other sectors that tend to move based on interest rates fell ahead of Wednesday's Federal Reserve meeting.
BY MICHAEL WURSTHORN