By Chuck Mikolajczak
NEW YORK (Reuters) - U.S. stocks retreated slightly on Thursday as investors paused after the Federal Reserve's decision to keep its stimulus intact sparked a rally that lifted the Dow and S&P 500 to record highs.
Major U.S. stock indexes oscillated between modest gains and losses on the heels of Wednesday's rally, with the S&P showing a swing of less than 10 points between the high and low of the session.
Many market participants had expected the Fed to announce it would begin to trim its stimulus, but the central bank instead said it would continue buying $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.
"It's not unusual, no matter what the circumstance is, for markets after a big up day or a big down day to level out," said Keith Bliss, senior vice-president at Cuttone & Co in New York.
"You are going to have people re-evaluating right here because once again we are in uncharted territory."
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.
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 in December, but most said their forecasts were very far from certain. (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 40.39 points or 0.26 percent, to 15,636.55, the S&P 500 (^GSPC) lost 3.18 points or 0.18 percent, to 1,722.34 and the Nasdaq Composite (^IXIC) added 5.743 points or 0.15 percent, to 3,789.384.
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.
Equity markets may see an increase in volatility towards the close on Friday when index managers, including the S&P, Dow Jones and Nasdaq, will rebalance their portfolios to match revised index weights. Credit Suisse expects total gross trading to total over $33 billion.
The New York Stock Exchange and NYSE MKT said it will hold a customer call starting at 3:30 p.m. (1930 GMT) to provide updates on system performance in anticipation of the increased market activity.
JPMorgan Chase & Co (JPM), fell 1.2 percent to $52.75 after the biggest U.S. bank agreed to 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. The KBW bank index (^BKX) lost 1.4 percent.
Shares of Tesla Motors (TSLA) hit a record high of $180.47, boosted in part by an upbeat note from analysts at Deutsche Bank. Shares of the electric car maker closed up 7 percent at $177.92.
Priceline.com Inc (PCLN) shares closed up 0.6 percent at $1,000.62, making it the first S&P 500 stock in history to close above $1,000.
Agilent Technologies (NYS:A) was one of the best performers 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 3.4 percent to $50.98.
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 edged up 2 cents to $33.89.
Rite Aid Corp (RAD) shares surged 23.5 percent to $4.58 after the drugstore chain raised its profit forecast for the current year after reporting a fourth straight quarterly profit.
Volume was active with about 6.74 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, above the daily average of 6.24 billion.
Declining stocks outnumbered advancing ones on the NYSE by 1,740 to 1,248, while on the Nasdaq, decliners beat advancers 1,364 to 1,136.
(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski and Kenneth Barry)