S&P 500; US Indexes Fundamental Daily Forecast – Stocks Close Lower as Investors Digest Fed Decisions

The three major stock U.S. stock indexes closed lower on Thursday as investors continued to digest yesterday’s Fed activity. On Wednesday, the U.S. Federal Reserve announced it will begin reducing its $4.5 trillion balance sheet starting in October. The central bank left its benchmark interest rate at<1.25 percent, however, it updated its rate forecast to include the possibility of a rate hike in December.

In the cash market, the benchmark S&P 500 Index settled at 2500.60, down 7.64 or -0.30%, the blue chip Dow Jones Industrial Average finished at 22359.23, down 53.36 or -0.24% and the tech-based NASDAQ Composite closed the session at 6422.69, down 33.35 or -0.52%.

For a second day, the financials were the biggest gainers because higher interest rates tend to correlate with increased profits for the sector. On Thursday, shares of Goldman Sachs, Citi, and Bank of America all traded above 0.5 percent.

While financial stocks underpinned the S&P 500, shares of major technology, telecommunications and consumer staples companies all weighed down the index.

The Dow hit a record high before closing lower for the first time in 10 days. Apple and Procter & Gamble contributed the most to the losses on Thursday.

Forecast

Investors may have been surprised by the Fed’s more hawkish stance, giving them an excuse to book profits. Sometimes markets pullback after a major event to give investors time to make adjustments and digest the news. This may have been the case on Thursday.

It’s probably too early to tell if the Fed’s hawkish tone will encourage investors to reallocate their portfolios at this time. There is plenty of time and plenty of economic reports to digest before the December 12-13 Fed meeting. However, after a spectacular run this month, it may just be time to take a little money off the table and regroup at more favorable price levels.