Wall St. struggles to rebound from selloff; oil a drag

NEW YORK (Reuters) - U.S. stocks were little changed on Wednesday, off their highs of the session, as investors continued to focus on when the Federal Reserve would adjust its rate policies.

Wall Street fell sharply on Tuesday, with the S&P 500 suffering its biggest one-day decline in two months, surpassing a selloff of similar magnitude on Friday, on the increasing view the Fed may raise interest rates as soon as June.

Stocks initially opened higher in a partial rebound from the previous session's sharp decline, but subsequently lost ground as oil turned weaker. Crude fell 1.4 percent after previously rising as much as 1.6 percent.

Recent concerns about rates pushed the U.S. dollar to a nearly 12-year peak against the euro on Tuesday and added to worries the dollar will continue to weigh on U.S. multinationals' earnings.

The U.S. dollar index <.DXY> stayed strong Wednesday, up 0.9 percent. It has risen in five of the past six sessions, up more than 4 percent over that period. The euro fell 1 percent to a 12-year low.

"The reason the Fed would raise rates is because growth dynamics are picking up, which would ultimately be a tailwind for markets, though markets will likely challenge that view with volatility," said Jeremy Zirin, chief equity strategist of wealth management at UBS in New York.

"We remain constructive that equities will grind higher over the course of 2015, but there will be some volatility based on any changes to the view of when the Fed will announce its first rate hike."

Despite the recent weakness, which took the Dow and S&P into negative territory for the year on Tuesday, the S&P is just 3.3 percent from a record close hit earlier this month. It is also near its 100-day moving average of 2,040.27. If it breaks below that level, that could signal weak medium-term momentum.

The decline in oil prices extends Tuesday's 3.4 percent drop. While oil is up roughly 10 percent from a bottom in late January, it remains down more than 55 percent from a June high.

"Oil is still trying to find a near-term equilibrium, and right now there's too much oversupply to turn prices around," Zirin said. "There's more risk to the downside than the upside."

Sandisk Corp rose 4.8 percent to $84.01 after Goldman Sachs added the company to its Conviction Buy list.

Express Inc rose 2 percent to $15.25 after fourth-quarter earnings and sales topped expectations.

At 10:59 a.m. the Dow Jones industrial average <.DJI> rose 25.3 points, or 0.14 percent, to 17,688.24, the S&P 500 <.SPX> lost 0.29 points, or 0.01 percent, to 2,043.87 and the Nasdaq Composite <.IXIC> dropped 5.04 points, or 0.1 percent, to 4,854.75.

Decliners outnumbered advancers on the NYSE by 1,442 to 1,433, for a 1.01-to-1 ratio; on the Nasdaq, 1,267 issues fell and 1,219 advanced, for a 1.04-to-1 ratio favoring decliners.

The S&P 500 was posting 9 new 52-week highs and 14 lows; the Nasdaq Composite was recording 42 new highs and 60 new lows.

(Editing by Chizu Nomiyama and Nick Zieminski)

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