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VOL. 42 | NO. 38 | Friday, September 21, 2018

Higher interest rates and oil prices send US stocks lower

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NEW YORK (AP) — Major U.S. indexes finished mostly lower Tuesday as rising interest rates hurt stocks that pay big dividends and higher oil prices pushed transportation and shipping companies lower. The S&P 500 index fell for the third day in a row.

Oil prices continued to rise after a weekend meeting of OPEC and its allies ended without an increase in oil production. That's helped energy companies, but it is pressuring airlines and other companies that will have to pay more for fuel. Higher oil prices can also ripple through the economy and increase inflation, and that's helped push interest rates higher this week.

On Wednesday the Federal Reserve is expected to increase its benchmark interest rate for the third time this year. Investors have been sure for months that the Fed would raise rates at this meeting, so they'll be focusing on the Fed's economic projections and Chairman Jay Powell's press conference afterward.

"He'll want to say as little as possible about tariffs, about fiscal policy, and say as little as possible about any advice the president may be giving him and the Federal Reserve about how to run monetary policy," said David Kelly, chief global strategist for JPMorgan Funds. But Kelly said the reporters will likely probe Powell's views on all of those topics.

The S&P 500 fell 3.81 points, or 0.1 percent, to 2,915.56. The Dow Jones Industrial Average lost 69.84 points, or 0.3 percent, to 26,492.21. The Nasdaq composite added 14.22 points, or 0.2 percent, to 8,007.47. The Russell 2000 index of smaller-company stocks gained 3.49 points, or 0.2 percent, to 1,708.80.

Bond prices kept falling as the Fed meeting began, sending yields higher. The yield on the 10-year Treasury note rose to 3.09 percent from 3.07 percent a day earlier.

Rising bond yields tend to hurt high-dividend companies, which many income-seeking investors see as substitutes for bonds. Among utilities, Southern Co. fell 2.5 percent to $42.73 and consumer goods maker Procter & Gamble lost 1.4 percent to $83.12.

Stocks usually do well when the Fed starts to raise interest rates because the higher rates reflect solid economic growth, which is associated with strong company profits. But as the rate increases continue, in line with the Fed's goal of keeping inflation in check, the effect on stocks can become negative as economic growth slows.

Oil prices continued to rise after a weekend meeting of OPEC and its allies ended without an increase in oil production. Oil prices have also climbed recently because Iran is exporting less oil after the U.S. withdrew from the international nuclear deal with Iran and announced more sanctions on the country.

Benchmark U.S. crude rose 0.3 percent to $72.28 a barrel in New York. Brent crude, the standard for international oil prices, rose 0.8 percent to $81.87 a barrel in London. Brent crude is at its highest price since November 2014.

ConocoPhillips rose 1.4 percent to $78.11 and Philips 66 added 1.3 percent to $114.88.

Drive-in restaurant chain Sonic jumped 18.7 percent to $43.46 after it agreed to be bought by Inspire Brands, which also owns Arby's and Buffalo Wild Wings. The purchase values Sonic at $43.50 a share, or $1.57 billion. Inspire Brands is controlled by the private equity firm Roark Capital.

XO Group, which runs the wedding marketplace The Knot, jumped 26.3 percent to $34.91 after it accepted a $907 million offer from two funds that own its competitor WeddingWire.

Companies around the world have announced $3.26 trillion in deals this year, according to Dealogic, far above the $2.49 billion in deals that were struck over the first three quarters of 2017. The recent U.S. corporate tax cut and low interest rates have contributed to that trend.

If the Fed does raise interest rates Wednesday, it would be the ninth increase since late 2015 and would take the benchmark rate to a range of 2 percent to 2.25 percent, with another increase expected this year and more to come in 2019.

Wholesale gasoline added 0.6 percent to $2.07 gallon. Heating oil rose 0.8 percent to $2.31 a gallon. Natural gas rose 1.4 percent to $3.08 per 1,000 cubic feet.

Gold rose 0.1 percent to $1,205.10 an ounce. Silver gained 1.1 percent to $14.49 an ounce. Copper fell 0.4 percent to $2.82 a pound.

The dollar rose to 112.93 yen from 112.73 yen. The euro rose to $1.1767 from $1.1758.

The British FTSE 100 index rose 0.7 percent. The DAX in Germany added 0.2 percent and France's CAC 40 gained 0.1 percent.

Tokyo's Nikkei 225 gained 0.3 percent and the Sensex in India slipped 0.1 percent. Markets in Hong Kong and Seoul were closed for holidays.

____

AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP His work can be found at https://apnews.com/search/marley%20jay

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