After seeing strength for much of the session, stocks pulled back sharply in the final hour of trading on Wednesday. The tech-heavy Nasdaq showed a particularly steep drop, while the Dow managed to cling to a modest gain.
The major averages eventually ended the session mixed. While the Dow inched up 36.78 points or 0.1 percent to 28,032.38, the Nasdaq plunged 139.85 points or 1.3 percent to 11,050.47 and the S&P 500 slid 15.71 points or 0.5 percent to 3,385.49.
The late-day pullback came despite a dovish monetary policy announcement by the Fed, with the central bank leaving interest rates unchanged and signaling rates are likely to remain at near-zero levels for years to come.
The Fed announced its widely expected decision to keep the target range for the federal funds rate at zero to 0.25 percent.
The economic projections provided along with the announcement suggest most Fed officials expect interest rates to remain unchanged through at least 2023.
The central bank said it expects rates to remain at current levels until labor market conditions reach levels consistent with maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.
The projections from Fed officials suggest consumer price inflation will remain below 2.0 percent until at least 2023.
The Fed's latest estimates point to a 3.7 percent contraction in GDP in 2020, reflecting an improvement from the 6.5 percent plunge forecast in June.
However, the Fed downwardly revised its estimates for GDP growth in 2021 and 2022 to 4.0 percent and 3.0 percent, respectively. GDP growth in 2023 was forecast at 2.5 percent.
The central bank reiterated its commitment to using its full range of tools to support the U.S. economy in this challenging time.
The sharp drop by the Nasdaq came as big-name tech companies like Apple (AAPL), Facebook (FB), Netflix (NFLX) and Amazon (AMZN) showed notable moves to the downside.
Ahead of the Fed announcement, the Commerce Department released a report showing a notable slowdown in the pace of retail sales growth in the month of August.
The Commerce Department said retail sales rose by 0.6 percent in August after climbing by a downwardly revised 0.9 percent in July.
Economists had expected retail sales to surge up by 1.0 percent compared to the 1.2 percent jump originally reported for the previous month.
Excluding sales by motor vehicles and parts retailers, retail sales climbed by 0.7 percent in August after leaping by a downwardly revised 1.3 percent in July.
Ex-auto sales were expected to increase by 0.9 percent compared to the 1.9 percent spike originally reported for the previous month.
The report also said closely watched core retail sales, which exclude automobiles, gasoline, building materials and food services, edged down by 0.1 percent in August after climbing by 0.9 percent in July.
"Consumers are being increasingly cautious with their outlays as the summer comes to a close," said Gregory Daco, Chief U.S. Economist at Oxford Economics.
He added, "If Congress is unable to extend fiscal aid to US households in the coming weeks, the US economy will be particularly susceptible to a cutback in consumer outlays - especially from the lowest income families."
A separate report from the National Association of Home Builders showed homebuilder confidence jumped to a record high in September.
The report said the NAHB/Wells Fargo Housing Market Index shot up to 83 in September from 78 in August. Economists had expected the index to come in unchanged.
With the unexpected increase, the index rose to its highest level in the 35-year history of the series, surpassing the previous record high of 78 that was set last month and also matched in December 1998.
Sector News
Software stocks moved significantly lower over the course of the session, dragging the Dow Jones U.S. Software Index down by 1.8 percent.
Shares of Adobe (ADBE) showed a notable move to the downside even though the software company reported better than expected fiscal third quarter results.
Considerable weakness also emerged among retail stocks, as reflected by the 1.4 percent drop by the Dow Jones U.S. Retail Index.
On the other hand, substantial strength remained visible among energy stocks, which moved sharply higher along with the price of crude oil.
Crude for October delivery jumped $1.88 to $40.16 a barrel following the release of a report showing an unexpected weekly decrease in crude oil inventories.
Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 3.7 percent, while the NYSE Arca Natural Gas Index and the NYSE Arca Oil Index both surged up by 3.5 percent.
Airline stocks also held on to strong gains despite the pullback by the broader markets, with the NYSE Arca Airline Index soaring by 3.1 percent.
Notable strength among housing and banking stocks also helped to partly offset the weakness that emerged in the aforementioned sectors.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan's Nikkei 225 Index inched up by 0.1 percent, while China's Shanghai Composite Index fell by 0.4 percent.
The major European markets also ended the day mixed amid cautious trading. While the U.K.'s FTSE 100 Index slid by 0.4 percent, the French CAC 40 Index crept up by 0.1 percent and the German DAX Index rose by 0.3 percent.
In the bond market, treasuries closed nearly unchanged for the third consecutive session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 0.687 percent.
Looking Ahead
Trading on Thursday may be impacted by continued reaction to the Fed announcement, while reports on weekly jobless claims, housing starts and Philadelphia-area manufacturing activity may also attract attention.
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