U.S. stocks decline after rally as election takes centre stage

U.S. stocks declined, with the S&P 500 Index retracing some of its biggest one-day gain in eight months, as voters head to the polls to choose a new president.

The S&P 500 slipped 0.2 percent to 2,127.02 at 9:40 a.m. in New York, after a 2.2 surge yesterday sparked by the FBI reiterating that Hillary Clinton’s controversial handling of her e-mails wasn’t a crime. The Dow Jones Industrial Average fell 22.81 points, or 0.1 percent, to 18,236.79, and the Nasdaq Composite Index lost 0.2 percent.

“It’s not a surprise we’re pulling back after the huge move yesterday,” said Matt Maley, an equity strategist at Miller Tabak & Co. LLC in New York. “A lot of people are just going to sit on their hands. The people who covered shorts and went long yesterday are probably wanting to take a few profits today.

“Even if it becomes more and more evident that Hillary Clinton is going to win, the upside is going to be a little limited because of the move yesterday.”

Clinton and Republican Donald Trump have spent the past days campaigning in key battleground states as polls showed the race had tightened. Still, state-by-state surveys indicate a narrow lead for the Democratic candidate. On websites that take bets on the presidential victor, her odds of winning the White House are generally about 80 percent.

The S&P 500 has been unable to push higher since reaching a record in August, wandering in a roughly 100-point band as investors assessed the political landscape, the likelihood for higher interest rates, corporate profits and economic data.

It hasn’t climbed for three consecutive sessions in more than month, and on Friday capped its ninth straight daily drop — its longest losing run since 1980. Still, the gauge closed Monday less than 3 percent from its all-time high.

Speculation on Clinton’s chances also helped bolster odds on a Federal Reserve interest-rate increase next month. Data compiled by Bloomberg based on fed funds futures trading show an 82 percent probability of higher borrowing costs by year end, up from 76 percent on Friday.

Amid the political drama, earnings season is winding down, with only a handful of S&P 500 members releasing Tuesday. Analysts now predict earnings growth of 2.5 percent in the July-September period for the benchmark’s constituents, reversing forecasts for a 1.6 percent decline at the start of the month. Retailers Macy’s Inc., Kohl’s Corp. and Nordstrom Inc. are due to report later this week.