(Reuters) – U.S. stocks pulled back from their all-time highs on Thursday as investors assessed the Federal Reserve’s policy statement, which hinted at raising interest rates for the third time this year and laid out plans to roll back its monetary stimulus.
The Fed said it would begin to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities – acquired in the years after the 2008 financial crisis – from October.
While the central bank left rates unchanged, it cited low unemployment, growth in business investment and an economic expansion that has been moderate but durable this year to build its case for another rate hike in 2017.
Interest rate futures are now pricing in about a 70 percent chance of a December hike, according to CME’s FedWatch tool, up from above 50 percent prior to the Fed meeting.
Fed Chair Janet Yellen said the fall in inflation this year remained a mystery, adding that the central bank was ready to change the interest rate outlook if needed.
“The hint of a rate hike in December was no surprise to us and we reiterate our stand, that it is not likely to unravel the market’s bullish posture in anticipation of tax cuts,” said Peter Cardillo, chief market economist at First Standard Financial.
At 9:41 a.m. ET (1341 GMT), the Dow Jones Industrial Average .DJI was down 11.45 points, or 0.05 percent, at 22,401.14, the S&P 500 .SPX was down 4.63 points, or 0.18 percent, at 2,503.61.
The Nasdaq Composite .IXIC was down 24.52 points, or 0.38 percent, at 6,431.53.
Nine of the 11 major S&P sectors were lower, with the technology index’s .SPLRCT 0.50 percent fall leading the decliners.
Apple (AAPL.O) was down 1 percent and was the biggest drag on all the three major indexes.
The financial sector .SPSY was among the two gainers as banks tend to perform better in a higher rate environment.
Citigroup (C.N), Bank of America (BAC.N), JPMorgan (JPM.N) and Goldman Sachs (GS.N) were all higher in early trading.
U.S. stocks have continued to climb this year, with the S&P up about 12 percent so far, helped by strong corporate profits and optimism that U.S. President Donald Trump will cut business taxes.
Economic data showed the number of Americans filing for unemployment benefits fell unexpectedly to 259,000, but the data continued to be influenced by Hurricanes Harvey and Irma, muddying the labor market picture in the near term.
Shares of Calgon Carbon (CCC.N) soared 61.5 percent after Japanese chemical manufacturer Kuraray (3405.T) agreed to buy the carbon materials firm for $1.107 billion.
Advanced Micro Devices (AMD.O) was up 1 percent after a report that Tesla (TSLA.O) is working with the chipmaker to develop its own artificial intelligence chip for self-driving cars. Rival chipmaker Nvidia (NVDA.O) was down 2.8 percent, while Tesla was flat.
Declining issues outnumbered advancers on the NYSE by 1,331 to 1,140. On the Nasdaq, 1,378 issues fell and 915 advanced.
Reporting by Tanya Agrawal; Editing by Arun Koyyur