* CBOE Volatility index rises to highest level since
* U.S. budget deal clears crucial vote in Senate
* KFN shares rise after KKR plan to pay $2.6 billion for
* Indexes down: Dow 0.2 pct, S&P 0.4 pct, Nasdaq 0.2 pct
By Angela Moon
NEW YORK, Dec 17 U.S. stocks edged lower on
Tuesday, with investors reluctant to make new bets before the
outcome the Federal Reserve's last policy-setting meeting of the
Major stock indexes briefly extended losses after a two-year
U.S. budget deal cleared a Senate procedural vote that all but
assured its passage by the Senate as early as Wednesday.
Although many in the market don't expect the Fed to begin to
wind down its market-friendly purchases of $85 billion a month
in bonds until March, some are betting the Fed will taper
earlier after a series of stronger-than-expected economic data.
The policy-setting Federal Open Market Committee is expected
to issue a statement on Wednesday at the meeting's conclusion.
The CBOE Volatility index VIX, Wall Street's
so-called fear gauge, rose 2.3 percent to 16.39, its highest
level since mid-October.
"There has been a lot of chatter recently about a December
tapering, so the next two days could be quite volatile," said
Tony Venosa, senior options strategist at Schaeffer's Investment
Investors digested a batch of economic data, trying to
assess the impact on the Fed's deliberations.
U.S. consumer prices were flat in November, but a bounce
back in the annual inflation rate from a four-year low will
probably give the Fed cover to start the taper. Separate data
showed the U.S. current account deficit was the smallest in four
years in the third quarter as exports increased and more income
was earned abroad.
The Fed has said its current policy is data-dependant, and
some market participants believe the U.S. central bank will
upgrade its economic forecasts in the two-day meeting.
The Dow Jones industrial average fell 28.07 points or
0.18 percent, to 15,856.5, the S&P 500 lost 6.63 points
or 0.37 percent, to 1,779.91 and the Nasdaq Composite
dropped 9.115 points or 0.23 percent, to 4,020.403.
In corporate news, specialty finance company KKR Financial
Holdings rose 27.5 percent to $12.05 a day after KKR &
Co said it would acquire KFN in a $2.6 billion deal.
KKR slipped 2.9 percent to $24.36.
Facebook shares rose 1.3 percent to $54.48 after the
Wall Street Journal reported the social network will begin
selling video ads later this week.
Shares of 3M rose 2.6 percent to $131.02 after the
industrial conglomerate affirmed its outlook and raised its
Boeing's board raised the company dividend about 50
percent on Monday and approved $10 billion in new share buyback
authority that the company said it would use in the next two to
three years. Shares rose 1.8 percent to $137.12.
AT&T said it would sell its wireline operations in
Connecticut to Frontier Communications for $2 billion in
cash, partly to fund the expansion of its 4G network. Frontier
shares jumped 8.5 percent to $4.77.