(Updates with afternoon trading)
* Dollar gains before start of Federal Reserve meeting
* Oil drops on report of rising stocks, Saudi output jump
* U.S. stocks slip as energy shares weigh; hospitals down
By Lewis Krauskopf
NEW YORK, March 14 (Reuters) - Oil prices dropped on Tuesday, weighing down energy shares in the wake of a report of rising crude stocks, while the U.S. dollar strengthened ahead of an expected Federal Reserve decision to raise interest rates.
Oil prices slid to three-month lows after OPEC reported a rise in global crude stocks and a surprise jump in production from its biggest member, Saudi Arabia, despite output curbs by the group.
U.S. crude prices fell 2 percent to $47.44 a barrel, touching their lowest point since Nov 30. Benchmark Brent crude fell 1.5 percent to $50.58 a barrel.
The decline in oil prices "affects the energy stocks, which affects the overall U.S. market," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
"But it also calls into concern growth worldwide somewhat, and that affects markets obviously, and I think you’re seeing a bit of that today."
MSCI's all-country world stock index fell 0.4 percent.
On Wall Street, major equity indexes fell, with the energy sector the worst performing group, falling 1.3 percent.
The Dow Jones Industrial Average fell 47.79 points, or 0.23 percent, to 20,833.69, the S&P 500 lost 10.23 points, or 0.43 percent, to 2,363.24 and the Nasdaq Composite dropped 26 points, or 0.44 percent, to 5,849.78.
Shares of U.S. hospitals and health insurers fell after the U.S. Congressional Budget Office forecast that 14 million Americans would lose medical insurance by next year under a Republican plan to dismantle the Affordable Healthcare Act, known informally as Obamacare.
The U.S. Federal Reserve said it would hold a policy meeting as planned on Tuesday and Wednesday, even as a snowstorm hit Washington.
With the central bank widely expected to raise rates, the focus will be on other aspects of the decision including the pace of future hikes.
“People tomorrow are going to be looking at what the Fed says after the meeting, what the rationale is for their move, and what they say about their balance sheet,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
"They have a balance sheet full of bonds they bought during QE and they’re going to start getting rid of them. Investors are wondering what will be the process," Hellwig said.
Investors also are assessing the potential outcome and impact of a gathering of G20 finance chiefs, U.S. President Donald Trump's first budget and a tense election in the Netherlands.
The pan-European STOXX 600 share index shed 0.3 percent, as banking and energy shares fell.
The dollar rose 0.2 percent against a basket of key currencies, bolstered by the Fed's expected interest rate increase and by political risks in Europe amid Dutch and French elections that have pressured European currencies.
The euro fell 0.2 percent on caution ahead of the Dutch vote.
U.S. Treasury yields edged lower, with those on long-dated and benchmark bonds retreating from three-month highs touched overnight as traders neutralized bets on the eve of the Fed's decision.
Prices on benchmark 10-year Treasuries rose 4/32 to yield 2.593 percent, from 2.607 percent late on Monday. (Additional reporting by Nigel Stephenson in London; Editing by Bernadette Baum)