* Wall Street drops after Fed rate hike as energy sector weighs
* Dollar gains as other cenbanks still in easing mode
* Pain continues for oil prices (Adds open of U.S. markets, byline, dateline; previous LONDON)
By Chuck Mikolajczak
NEW YORK, Dec 17 (Reuters) - Wall Street led global equity markets lower on Thursday a day after the U.S. Federal Reserve’s first interest rate hike in nearly a decade, as continued pressure on oil weighed on energy-related stocks.
The long-anticipated though modest increase in the federal funds rate boosted the dollar to a fresh two-week high against a basket of major currencies.
Brent and U.S. crude fell and remained near multi-year lows on oversupply concerns and strength in the dollar.
The oil woes helped push U.S. equities lower after rallying on Wednesday, with the S&P energy index down 2 percent as the worst performing of the 10 major S&P sectors.
“We are seeing some weakness but we are not seeing that hyperbolic fear that we have seen really inform the entire equity trading narrative as a result of crude’s collapse,” said Peter Kenny, equity market strategist at Kenny & Co LLC, in Denver.
“It is going to continue to be a variable that weighs on the market.”
Stocks in Europe gained, however, as investors there took the Fed hike as a sign of confidence in the world’s largest economy.
The Fed’s stimulus measures have helped the S&P 500 more than triple from lows reached in March 2009 during the Great Recession.
The Dow Jones industrial average fell 165.96 points, or 0.94 percent, to 17,583.13, the S&P 500 lost 23.75 points, or 1.15 percent, to 2,049.32 and the Nasdaq Composite dropped 49.82 points, or 0.98 percent, to 5,021.31.
MSCI’s all-country world index lost 0.3 percent, even as the pan-European FTSEurofirst 300 index jumped 1.1 percent.
The dollar index, which measures the greenback against a basket of other major currencies, was up 1.1 percent at 98.955, on pace for its biggest percentage gain since Nov. 6. The euro lost 0.6 percent at $1.0848, exemplifying the diverging paths of the Fed and European Central Bank.
After touching 1.021 percent on Wednesday, a 5-1/2 year high, yields on two-year notes were last at 0.9966 percent. Yields on the benchmark 10-year Treasury notes fell to 2.2587 percent, up 9/32 in price as investors turned their attention to timing of the next hike.
Another sustained rise in the dollar could spell further trouble for commodities, by making them more expensive when measured in other currencies.
Copper slipped 1.4 percent and is down nearly 28 percent for the year so far. Spot gold hit a two-week low of $1,047.25 an ounce and was last at $1,051.85.
The relief that the Fed had finally delivered pushed MSCI’s main emerging market stocks index up 0.9 percent and more than 3 percent higher since the start of the week, but it remains down almost 17 percent for the year.
The prospect of higher Fed rates is seen as a negative for emerging markets because one of their main appeals is that they pay relatively higher interest rates than assets in developed economies such as the United States.
Reporting by Chuck Mikolajczak; Editing by Meredith Mazzilli