How major US stock indexes fared Tuesday

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The Dow Jones Industrial Average was also off 2.1% and the Nasdaq, down 2.3%.

Bank stocks were fractionally lower on the day, with the KBW Bank Index down 0.25% as the spread between the 2- and 10-year yields held near 16 basis points.

US crude fell to its lowest price since August 2017 Tuesday and is now down almost 40 percent since early October. The rate helps set borrowing costs for various types of loans, and higher rates can slow economic growth and make stocks look relatively less attractive.

Traders were positioning themselves ahead of the Fed's two-day meeting, which begins on Tuesday and is expected to produce the fourth rate hike this year and ninth since the financial crisis. Pre-market trading is up slightly for the Dow, S&P 500, and Nasdaq.

Homebuilder sentiment drops in December to the lowest point in more than three years as potential buyers delayed purchasing new homes, giving rise to concerns over affordability. Retail stocks declined overall, with the S&P 500 Retailing Index falling 3.4 percent.

The Nasdaq is down 126.75 points, or 1.8 per cent. "The hiatus on trade helps as well, but I'm a bit more skeptical about how long lasting that is", Ronald Temple, head of US equity at Lazard Asset Management, told Bloomberg TV.The Fed is likely to hike rates on Wednesday, even as President Donald Trump intensifies his attacks on the central bank. Brent crude, used to price worldwide oils, dipped 1.1 percent to $59.61 a barrel in London. "He precipitated this sell-off in early October when he said we were a long way from the "neutral" federal funds rate".

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Meanwhile, the 10-year Treasury note was yielding 2.86%, pulling back from its Friday values, indicating buying in government bonds and a so-called risk-off mode in the market with investors fleeing to the perceived risk government bonds. President Trump, in a tweet Monday morning, repeated his criticism of the Federal Reserve for its recent rate hikes. But he said investors might be startled if the Fed doesn't raise rates this week, as has been widely expected. "Clearly it's in sharp contrast to last year's optimistic outlook".

"Investors are zeroing in on this idea of slower growth for 2019", said Michael Arone, chief investment strategist at State Street Global Advisors.

In other energy trading, wholesale gasoline shed 1.7 percent to $1.41 a gallon and heating oil slid 1 percent to $1.83 a gallon.

Japan's Nikkei 225 index added 0.6 percent and the Kospi in South Korea gained 0.1 percent.

The dollar slipped to 112.75 yen from 113.29 yen. The euro rose to $1.1387 from $1.1366.

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