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US STOCKS-Wall St markets edge lower on oil ahead of Fed

Published 09/23/2009, 11:49 AM
Updated 09/23/2009, 11:51 AM
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* Fed statement awaited for policy guidance

* Energy shares down after EIA inventory data

* General Mills rises after profit tops estimate

* Dow down 0.2 pct, S&P 500 down 0.3, Nasdaq down 0.1 pct

(Updates to midday, changes byline)

By Ryan Vlastelica

NEW YORK, Sept 23 (Reuters) - U.S. stocks edged lower on Wednesday, pressured by falling crude-oil prices, as investors awaited a policy statement from the Federal Reserve.

Trading was subdued ahead of the Fed's announcement, with investors focused on whether the central bank will signal any changes to its plan for asset purchases or monetary policy.

October crude oil futures shed 4 percent to $68.85 per barrel after data from the Energy Information Administration showed oil stockpiles unexpectedly rose last week.

"The inventory level is bearish and that's pushing stocks to the downside," said Dan Faretta, senior market strategist at Lind-Waldock in Chicago.

"Demand for oil has been weak, and the markets are consolidating. If oil prices break, that could continue to pull markets lower."

The Fed is expected to keep interest rates unchanged, so investors will look to the committee's statement and whether the language used suggests a shift in its efforts to revive the economy by flooding the markets with cheap money. The Fed's statement is expected around 2:15 p.m. (1815 GMT)

"It won't be a surprising statement," Faretta said. "It might say that the economy is improving and that inflation is in check. If (Fed Chairman Ben) Bernanke says that about inflation, you may see the market rally this afternoon. If he doesn't, we'll see a muted trade."

The Dow Jones industrial average dropped 19.72 points, or 0.21 percent, to 9,808.79. The Standard & Poor's 500 Index fell 3.08 points, or 0.29 percent, to 1,068.58. The Nasdaq Composite Index fell 2.35 points, or 0.11 percent, to 2,143.92.

Cereal maker General Mills Inc advanced after it posted a higher-than-expected quarterly profit and raised its outlook. The stock rose 4.6 percent to $63.76, lifting peer company Kellogg Co 2.5 percent to $49.72.

Ford Motor Co rose 5.7 percent to $7.41 after the company's chief executive said the U.S. market was showing signs of recovery. The automaker also said it would start production of a small car in India early next year.

Real estate investment trusts (REITs) Colony Financial Inc and Apollo Commercial Real Estate Finance Inc lowered the number of shares they expect to sell in initial public offerings.

Also pressuring REITs was a BMO Capital Markets downgrade of the sector to "market perform." The Dow Jones U.S. Residential REITs Index dropped 1.8 percent.

Airline stocks fell after American Airlines parent company AMR Corp and US Airways Group Inc launched share sales to raise money for general corporate purposes.

AMR dropped 4.2 percent to $8.09 while US Airways dropped 9.9 percent to $4.71. The AMEX airline index dropped 2.2 percent.

U.S. President Barack Obama, speaking at the United Nations, vowed to work for "balanced and sustained" growth at a Group of 20 nations summit in Pittsburgh this week, saying financial regulation needed strengthening to put an end to the "greed, excess and abuse" that caused the financial crisis.

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