* Fed keeps rates steady
* U.S. stocks pull back after rally
* Dollar advances after Fed statement
* Oil stumbles more than 1 percent (Updates market action after Fed statement)
By Chuck Mikolajczak
NEW YORK, Nov 8 (Reuters) - World equity markets declined on Thursday and were on track to snap a seven-session winning streak as U.S. stocks remained on the defensive while the U.S. dollar strengthened after the Federal Reserve kept interest rates unchanged.
The U.S. central bank held rates steady and said ongoing strong job gains and household spending had kept the economy on track. Its statement showed little change in the Fed’s outlook for the economy since the Fed’s previous meeting in September aside from noting that “business investment had moderated from its rapid pace earlier in the year.”
“The Fed has recognized that there is one part of the economy that is slowing a little bit, but it is not deterring them from their gradual increase language. Not yet anyway,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia.
“There is really nothing to point to what the market had hoped, that there would be a more dovish stance, so I think this is more of what we call a hawkish hold.”
U.S. shares extended losses after the Fed statement, on the heels of Wednesday’s post-election rally of more than 2 percent. Those gains came as investors celebrated political gridlock in the United States as Democrats took control of the House of Representatives after the midterm congressional vote, while Republicans maintained control of the Senate.
A spate of weak earnings also gave investors reason for pause, with Qualcomm one of the biggest drags on the benchmark S&P 500 index, down 7.7 percent as the loss of chip sales to Apple caused the company to cut its fourth-quarter outlook.
The Dow Jones Industrial Average fell 22.16 points, or 0.08 percent, to 26,158.14, the S&P 500 lost 11.07 points, or 0.39 percent, to 2,802.82 and the Nasdaq Composite dropped 42.89 points, or 0.57 percent, to 7,527.86.
European shares closed higher, led by banking shares following results from names such as SocGen and Commerzbank.
The pan-European STOXX 600 index rose 0.19 percent and MSCI’s gauge of stocks across the globe shed 0.30 percent.
The dollar had advanced heading into the Fed statement and slightly added to its gains after weakening in the prior session.
Traders currently see a 71.2 percent chance the Fed will raise rates by a quarter percentage point at its December meeting, according to CME’s FedWatch, up from 68.8 percent on Nov 1.
The dollar index rose 0.59 percent, with the euro down 0.45 percent to $1.1373.
Oil prices fell more than 1 percent, surrendering early gains as investors focused on swelling global crude supply, which is increasing faster than many had expected.
U.S. crude fell 1.61 percent to $60.68 per barrel and Brent was last at $70.64, down 1.98 percent.
Benchmark 10-year U.S. Treasury notes last fell 7/32 in price to yield 3.2373 percent, from 3.213 percent late on Wednesday.
Additional reporting by Lewis Krauskopf; Editing by Bernadette Baum and James Dalgleish