US stocks dropped sharply overnight as investors took back profits after the recent rally ahead of the eagerly awaited Federal Reserve meeting this week. The Dow Jones tumbled 127.80 points, or 1.4pc, to 9,072.95 and the Nasdaq composite fell 33.97 points , or 2pc, to 1,610.75. The meeting begins this afternoon but a decision is not due until Wednesday evening, and analysts expect to see further selling in New York tonight as the market awaits the news. Economists say a rate cut is almost guaranteed but are divided over whether the Fed will lower rates by 25 or 50 basis points.
On the industrial average, where 25 out of 30 components closed lower, Alcoa was the big loser. It dropped 4.5pc after S&P cut its debt rating on the aluminium maker by one notch, noting large retirement benefit costs. Altria was the only stock to make any significant gains, adding almost 2pc to USD43.85 after Morgan Stanley raised its 12-month price target to USD62 from USD48. In other corporate news, biotechs Biogen and IDEC Pharmaceutical agreed to merge in an all-paper deal worth about USD6.7bn; both firms shed more than 5pc on the Nasdaq. //www.fxcentre.com/