US close: Dow, S & P 500 close at session highs as Fed starts QE taper

The Dow Industrials and S & P 500 ended slightly higher even as the US Federal Reserve announced the historic end to its balance sheet expansion, although the Nasdaq was held back by losses in shares of Apple.

Following two days of deliberations, and as expected, on Wednesday the US central bank said it would begin limiting the reinvestment of principal payments on its holdings of government and agency debt by $10bn, starting from October, while the target range for the Fed funds rate was kept at between 1.0% and 1.25%.

More interesting perhaps, while not a foregone conclusion, although many analysts thought otherwise, the Fed's Summary Of Economic Projections held out the possibility of another 25 basis point interest rate hike come December.

Against that backdrop, the Dow Jones Industrials Average closed up by 0.19% or 41.79 points at 22,412.59, alongside a gain of 0.06% or 1.59 points to 2,508.24 for the S&P 500. In parallel, according to the CME's Fed Watch tool, Fed fund futures were pricing-in 71.9% odds of a December rate hike.

The Nasdaq Composite on the other hand closed 0.08% or 5.28 points lower to 6,456.04, as shares of Apple came under selling pressure.

From a sector standpoint, the best performing areas of the market were: Aluminum (2.82%), Non-ferrous metals (2.48%) and Gambling (2.03%).

Commenting on the Federal Open Market Committee's decision (and on the more dovish side of things), Philip Marey at Rabobank told clients:"While the Fed remains on course, we still have our doubts about the third rate hike. Note that the minutes of the previous meeting, in July, revealed a fierce debate about the inflation outlook.

"At the press conference, Fed Chair Yellen was not able to offer a good explanation for low inflation this year. We expect core inflation to continue to fall short, which should induce the FOMC to delay the next hike to next year. Note that retiring Vice Chairman Fischer – who would be inclined to vote for a hike – will no longer be a voter at the next two meetings."

On the other side of the argument, Danske Bank said: "The statement and dots confirm our view that while the four most dovish members (probably Bullard, Brainard, Evans and Kashkari, in our view) are still concerned about low inflation and do not think it is appropriate to raise rates further this year, core FOMC members still believe that above-trend growth and a tighter labour market will lead to higher wage growth and hence inflation eventually."

Also on the economic front, in August existing US home sales dropped by 1.7% on the month to reach an annualised pace of 5.35m (consensus: 5.45m), according to the National Association of Realtors.

In corporate news, Apple was a drag on the main indices as reports surfaced of connectivity problems with its new Apple Watch Series 3.

Going the other way, Pfizer was a notable riser after analysts at Morgan Stanley upgraded their recommendation on the stock from 'neutral' to 'overweight'.

American Outdoor Brands was higher as well following reports late on Tuesday that President Trump will ease rules on gun exports.

Retailer Bed Bath & Beyond tanked nearly 16% after its earnings late on Tuesday missed analysts' expectations. The company said same-store sales declined 2.6% in the second quarter, versus expectations of a 0.7% drop, while sales of $2.9bn fell short of estimates of $3bn.

Elsewhere, FedEx was also in focus after its earnings late on Tuesday also disappointed, with the company cutting its profit forecast for the year as it took a hit from a cyber attack.

Dow Jones - Risers

McDonald's Corp. (MCD) $159.89 1.56%
Pfizer Inc. (PFE) $35.99 1.52%
Boeing Co. (BA) $255.46 1.19%
Travelers Company Inc. (TRV) $121.91 1.10%
International Business Machines Corp. (IBM) $145.79 1.03%
Walt Disney Co. (DIS) $99.21 0.79%
JP Morgan Chase & Co. (JPM) $94.60 0.70%
Home Depot Inc. (HD) $158.69 0.65%
Unitedhealth Group Inc. (UNH) $195.75 0.57%
Wal-Mart Stores Inc. (WMT) $80.50 0.56%

Dow Jones - Fallers

Apple Inc. (AAPL) $156.07 -1.68%
Johnson & Johnson (JNJ) $133.22 -1.48%
3M Co. (MMM) $210.40 -1.43%
Microsoft Corp. (MSFT) $74.94 -0.66%
American Express Co. (AXP) $88.43 -0.64%
Coca-Cola Co. (KO) $45.78 -0.43%
Intel Corp. (INTC) $37.07 -0.43%
Visa Inc. (V) $104.97 -0.42%
Merck & Co. Inc. (MRK) $65.78 -0.24%
E.I. du Pont de Nemours and Co. (DD) $83.93 -0.00%

S&P 500 - Risers

Transocean Ltd. (RIG) $9.77 4.49%
Diamond Offshore Drilling Inc. (DO) $13.82 4.14%
Chesapeake Energy Corp. (CHK) $4.18 3.71%
Interpublic Group of Companies Inc. (IPG) $20.78 3.69%
Marathon Oil Corp. (MRO) $12.42 3.50%
TEGNA Inc (TGNA) $12.80 3.39%
Devon Energy Corp. (DVN) $34.89 3.32%
Roper Technologies Inc (ROP) $246.22 3.19%
Apache Corp. (APA) $43.05 3.11%
Newfield Exploration Co (NFX) $28.67 3.09%

S&P 500 - Fallers

Bed Bath & Beyond Inc. (BBBY) $22.74 -15.87%
General Mills Inc. (GIS) $52.17 -5.80%
Qorvo, Inc. (QRVO) $70.32 -5.38%
L Brands Inc (LB) $37.22 -5.10%
Adobe Systems Inc. (ADBE) $149.96 -4.24%
Skyworks Solutions Inc. (SWKS) $103.51 -4.10%
Western Digital Corp. (WDC) $86.37 -3.95%
Signet Jewelers Ltd (SIG) $64.91 -3.26%
Microchip Technology Inc. (MCHP) $88.32 -2.92%
CVS Health Corp (CVS) $80.70 -2.89%

Nasdaq 100 - Risers

Liberty Interactive Corporation QVC Group (QVCA) $23.19 2.38%
American Airlines Group (AAL) $45.42 2.34%
Viacom Inc. Class B (VIAB) $27.72 2.14%
CSX Corp. (CSX) $52.81 1.99%
Henry Schein Inc. (HSIC) $80.39 1.58%
Regeneron Pharmaceuticals Inc. (REGN) $438.17 1.57%
J.B. Hunt Transport Services Inc. (JBHT) $104.26 1.55%
Liberty Global plc Series A (LBTYA) $33.81 1.47%
Paypal Holdings Inc (PYPL) $64.74 1.43%
Dentsply International Inc. (XRAY) $58.65 1.38%

Nasdaq 100 - Fallers

Adobe Systems Inc. (ADBE) $149.96 -4.24%
Skyworks Solutions Inc. (SWKS) $103.51 -4.10%
Western Digital Corp. (WDC) $86.37 -3.95%
Microchip Technology Inc. (MCHP) $88.32 -2.92%
Walgreens Boots Alliance, Inc. (WBA) $78.84 -2.92%
T-Mobile Us, Inc. (TMUS) $63.52 -2.90%
Broadcom Limited (AVGO) $242.91 -2.74%
Lam Research Corp. (LRCX) $173.02 -2.31%
KLA-Tencor Corp. (KLAC) $99.66 -2.30%
Applied Materials Inc. (AMAT) $47.28 -2.03%