Stocks pulled back slightly Thursday following the Federal Reserve's surprise decision Wednesday to maintain its stimulus program, leaving investors to ponder just how weak the U.S. economy is.
The Dow Jones industrial average (^DJI) lost 40 points, or 0.3 percent, to 15,636, the Standard & Poor's 500 index (^GPSC) slipped 3 points, or 0.2 percent, to 1,722, but the Nasdaq composite index (^IXIC) -- which unlike the other two, did not set a new record Wednesday -- edged up 5 points, or 0.2 percent, to 3,789.
The Fed voted Wednesday to continue its $85 billion-a-month bond-buying program at full strength. The decision was a surprise because Bernanke and other voting members of the Fed had telegraphed over the summer that the central bank was considering pulling back as the economic recovery picks up speed.
The decision to leave the current stimulus suggested to some investors the economy is weaker than previously thought, though a number of economic reports released Thursday suggested that wasn't the case.
The National Association of Realtors reported existing home sales surged in August to a 6½-year high, while a report from the Federal Reserve Bank of Philadelphia showed factories grew busier in the Mid-Atlantic region this month -- both signs that rising borrowing costs are weighing only modestly on the economy.
In yet another indication the economy is shrugging off higher borrowing costs, an index of U.S. leading indicators from the Conference Board advanced by a greater-than-expected 0.7 percent in August.
Some economists, however, feel it is just a matter of time before the spike in mortgage rates hits the housing market harder. Already, new home construction has looked wobbly. Citing lower demand for mortgage refinancing due to higher interest rates, Wells Fargo (WFC) said it was laying off 1,800 workers in its home loan business.
A separate report from the Labor Department showed the number of initial claims for state unemployment benefits last week held near its lowest levels since before the last recession began in December 2007. A Labor Department analyst said California and Nevada still appeared to be working through a backlog of new claims, however, making it hard to get a clear read on the health of the labor market.
Yet another report highlighted how much an increase in American exports is helping the global economy achieve a more healthy balance of trade and money flows. The current account deficit, a broad measure of the flow of goods, services and money across national borders, dropped to $98.9 billion in the April-June period from a revised $104.9 billion in the prior period.
After climbing Wednesday following the Fed's announcement, oil prices edged lower Thursday. Benchmark crude fell 1.6 percent to $106.39 a barrel. But the price of gold continued to climb, surging 4.7 percent to $1,369.30.
JPMorgan Chase, the biggest U.S. bank, will pay about $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 Thursday. JPMorgan (JPM) shares lost 1.5 percent to close at $52.80.
More Stocks in the News:
ConAgra Foods (CAG), whose many brands include Chef Boyardee and Marie Callender's, slumped 3.9 percent to $30.82 after the company's income fell short of analysts' expectations. The company also cut its outlook for 2014.
Rite Aid (RAD) rocketed up more than 23 percent to $4.58, after the drug store chain reported an unexpected second-quarter profit. It also raised its profit forecast for fiscal year 2014.
Agilent Technologies (A), which makes scientific instruments, gained 3.4 percent $50.98 after announcing a spinoff of its electronic measurement business.
Shares of Tesla Motors (TSLA) 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 ended Thursday trading up 7 percent to $177.86.
Oracle (ORCL) 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. Still, its shares inched 0.2 percent higher to $33.93.
What to Watch Friday:
Darden Restaurants (DRI) reports quarterly corporate earnings.
Esther George, president of the Federal Reserve Bank of Kansas City, speaks on the economy to the Shadow Open Market Committee in New York at 12:30 p.m. Eastern time.
-Compiled from staff and wire reports.