September 19, 2013 / 4:52 PM / in 5 years

Wall Street dips as traders digest Fed-driven rally

NEW YORK (Reuters) - U.S. stocks dipped on Thursday a day after the S&P 500 hit a record high as the market ralled on the Federal Reserve’s surprise decision to maintain its stimulus intact.

Traders pause during a moment of silence to honor victims of the 9/11 attacks on the World Trade Center, on the floor of the New York Stock Exchange September 11, 2013. REUTERS/Lucas Jackson

Major U.S. stock indexes seesawed between modest gains and losses after Wednesday’s rally. The Fed was expected to announce it would taper its stimulus but instead announced it would keep purchasing $85 billion in bonds every month. The program has been instrumental in lifting the benchmark S&P index 20 percent this year while keeping Treasuries yields under pressure.

The Fed said it wants more evidence of solid economic growth before beginning to withdraw its stimulus. Data on Thursday showed factory activity in the U.S. mid-Atlantic region increased by the most in more than two years and firms’ optimism about the future hit a 10-year high.

“The economy is improving slowly. It is a decent enough background for people to want to invest in equities,” said Mark Lehmann, president of JMP Securities in San Francisco.

“The stock market is still the best house on a tough block, the best asset class at least through the rest of the year.”

A Reuters poll of 17 primary bond dealers on Wednesday found that nine were now looking for the U.S. central bank to trim its bond purchases at a meeting in December, but most said their forecasts were very far from certain.

One looked for a reduction in October, two more said the Fed would wait until next year and five were not ready to make a forecast. <FED/R>

News that the Fed would delay winding down its stimulus until it had more evidence of solid economic growth boosted global equity markets on Thursday, especially emerging markets as investors returned to riskier assets.

The Dow Jones industrial average .DJI fell 27.86 points or 0.18 percent, to 15,649.08, the S&P 500 .SPX lost 1.36 points or 0.08 percent, to 1,724.16 and the Nasdaq Composite .IXIC added 3.943 points or 0.1 percent, to 3,787.584.

The S&P hit 1,729.86, a record intraday high. The broad benchmark and the 30-stock Dow industrials closed at record highs Wednesday, while the Nasdaq Composite closed at its highest in 13 years.

JPMorgan Chase & Co (JPM.N), the biggest U.S. bank, will pay approximately $920 million in penalties to regulators in two countries to settle some of its potential liabilities from its $6.2-billion “London Whale” derivatives loss last year, according to terms made public on Thursday. JPMorgan shares were down 1 percent at $52.88.

Shares of Tesla Motors (TSLA.O) hit a record high, boosted in part by an upbeat note from analysts at Deutsche Bank. Shares of the electric car maker hit $179.40 and were recently up 7.7 percent at $179.05.

Agilent Technologies (A.N) shares were the largest percentage gainer on the S&P 500 after the company said it will spin off its electronic measurement business to focus on its fast-growing healthcare business. The stock gained 4.7 percent to $51.64.

Oracle Corp (ORCL.N) forecast sales and profit for its second quarter that fell short of expectations as it continues to battle soft global IT demand and smaller rivals. Its shares slipped 0.7 percent to $33.62.

Rite Aid Corp (RAD.N) shares rallied 15.8 percent to $4.30 after the drugstore chain raised its profit forecast for the current year after reporting a fourth straight quarterly profit.

Reporting by Rodrigo Campos; Editing by Kenneth Barry

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