Wall St drops on FedEx outlook, trade worries; all eyes on Fed

Wall Street's main indexes slipped on Wednesday following a weak profit outlook from economic bellwether FedEx Corp and on trade concerns, while investors waited for more clarity regarding the Federal Reserve's interest rate forecast.

In a knee-jerk reaction, stocks hit session lows after President Donald Trump said tariffs could be left on China for a long period of time, but pared some of the losses soon after. Trump also said a trade deal with Beijing was coming along, with U.S. trade negotiators going to China soon.

The central bank is expected to keep the fed funds rate steady and lower the number of hikes forecast for 2019 as it wraps up a two-day policy meeting, followed by a statement and a news conference.

The policy statement, due at 2:00 p.m. ET, will also shed light on long-awaited details regarding the Fed's plans to stop reducing its holdings of Treasury bonds.

"The big picture today is the Fed meeting. Investors are slowly moving to the sidelines because all the good news is already baked in and they just want the Fed's confirmation that 'all is good'," said James Hickey, chief investment strategist at HD Vest in Irving, Texas.

"People tend to overestimate the impact of not getting a deal done with China," Hickey said.

FedEx Corp dropped 5.5 percent after the package delivery company cut its 2019 profit forecast for the second time on slowing global trade growth.

FedEx dragged Dow Jones Transport down 1.93 percent and the index, which is closely monitored to gauge the health of the economy, was on pace for its biggest one-day percentage drop in almost two months.

Expectations of a dovish stance from the Fed pushed the rate-sensitive financial stocks down 1 percent, the most among 11 major S&P sectors. The bank sub-sector fell 1.02 percent.

At 12:52 p.m. ET the Dow Jones Industrial Average was down 169.30 points, or 0.65 percent, at 25,718.08. The S&P 500  was down 15.46 points, or 0.55 percent, at 2,817.11 and the Nasdaq Composite was down 35.86 points, or 0.46 percent, at 7,688.09.

Higher oil prices kept energy stocks afloat while gains in Facebook Inc and Alphabet Inc buoyed the communication services sector.

Optimism that the Fed will remain patient in raising borrowing costs and hopes that United States and China will resolve their trade spat helped U.S. stocks erase most of their losses from late last year.

The benchmark S&P 500 still remains 4 percent away from its record closing high in September.

General Mills Inc jumped 3.8 percent, the most on the S&P, after the Cheerios cereal maker raised its full-year forecast.

Declining issues outnumbered advancers for a 2.57-to-1 ratio on the NYSE and a 2.60-to-1 ratio on the Nasdaq.

The S&P index recorded nine new 52-week highs and two new lows, while the Nasdaq recorded 28 new highs and 32 new lows.