The sun rises to the east of the U.S. Federal Reserve building in Washington, July 31, 2013.Jonathan Ernst/Reuters
The Toronto stock market was lower as oil prices continued to slide and traders speculated about what the U.S. Federal Reserve may have to say about the pace of interest rate hikes as it starts its two-day meeting Tuesday.
The S&P/TSX composite index dropped 108.8 points to 14,753.92. The Canadian dollar was ahead 0.04 of a U.S. cent at 78.29 cents.
The TSX sustained more selling pressure from the energy sector as supply issues continued to drive the price of crude closer to the $40 a barrel mark. April crude on the New York Mercantile Exchange is down 53 cents to US$43.35 a barrel.
U.S. indexes were also in the red with the Dow Jones industrials down 163.3 points to 17,814.14, the Nasdaq was 14.23 points lower to 4,915.28 and the S&P 500 index lost 12.1 points to 2,069.09.
The U.S. Federal Reserve starts its two-day meeting on interest rates Tuesday. Traders will be mainly watching whether the central bank removes the reference to being "patient" about hiking rates from near zero. Fed officials will assess the economy and debate the timing of the first interest-rate increase since 2006.
"Yesterday's rally was pretty impressive," Yousef Abbasi, the global market strategist at JonesTrading Institutional Services LLC in New York, said by phone. "A lot of people were pointing to the fact with the looming Fed decision you're likely to see Yellen tiptoe on the line and err on side of caution."
Speculation that a strengthening economy is pushing the central bank closer to a rate increase has weighed on U.S. equities, making them among the worst-performing developed markets this year. Fed stimulus helped spur a six-year bull market that made the S&P 500 more than triple since a low in in 2009.
Beginning home construction plunged in February on colder- than-usual temperatures and snowstorms in parts of the U.S., while an increase in building permits indicated the drop may prove temporary.
Housing starts slumped 17 percent, the most since February 2011, to an 897,000 annualized rate after January's revised 1.08 million pace, the Commerce Department reported Tuesday in Washington. The median estimate of 80 economists surveyed by Bloomberg called for 1.04 million. Ground-breaking in the Northeast plummeted by the most on record.
Investors are weighing whether weaker than-expected U.S. economic data could temper the outlook for higher rates. The Bloomberg ECO U.S. Surprise Index, which measures whether data beat or missed forecasts, dropped to the lowest level since 2009.
With almost all members of the S&P 500 having reported fourth-quarter earnings, 74 percent have exceeded profit estimates while 56 percent surpassed sales projections. Adobe Systems Inc. and Oracle Corp. are due to release financial results after the close of U.S. trading.
With files from Bloomberg News