The S&P 500 came under selling pressure into the close Wednesday, as the Federal Reserve's minutes from its July meeting signaled that the central bank could begin tapering its monthly bond purchases this year.
The S&P 500 fell 1.07%, the Dow Jones Industrial Average slipped 1.08%, or 382 points, the Nasdaq was down 0.9%.
"[M]ost participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year," the Fed's minutes showed.
The labor market is the heart of the Fed's decision on when to get tapering underway, but the central bank believes there is still ground to cover on jobs.
"Most participants judged that the Committee's standard of 'substantial further progress' toward the maximum-employment goal had not yet been met," according to the Fed's minutes. "Most participants remarked that this standard had been achieved with respect to the price-stability goal."
With the Federal Reserve now largely expected to begin scaling back its bond purchases by year-end, investors believe the central bank will need to take a proactive approach, taking its foot off the tightening pedal on any sign of worry in the economy to keep stocks grinding higher.
“The Fed will begin to increasingly reduce its monetary policy support [at a time] when many see this summer as peak stimulus," Zhiwei Ren, Managing Director and Portfolio Manager, at Penn Mutual Asset Management told Investing.com in an interview on Wednesday. "This could be an issue for the economy and for the market."
"One way they [the Fed] can avoid this, is to change course right away, If they see something wrong," Ren added. "This is what the market is [currently] pricing in now [...] the market doesn't think the Fed will get to a 2.5% neutral rate, but rather 1.5% or 1.6% and then stop tightening."
Monetary policy aside, a slew of retailers including Lowe's and Target reported quarterly results that topped Wall Street expectations, but saw mixed reaction from investors.
Lowe’s Companies (NYSE:LOW) jumped 10% as the home improvement retailer lifted its full-year outlook after reporting quarterly results that topped analysts expectations.
Target Corporation (NYSE:TGT), meanwhile, also delivered quarterly results that beat on the top and bottom lines, but its shares fell 3%.
Krispy Kreme (NASDAQ:DNUT), which made its return to the stock market last month, fell 7% after the doughnut chain reported mixed quarterly results as earnings fell short, but revenue beat Wall Street expectations.
Energy stocks, meanwhile, shrugged off intraday losses despite weaker oil prices amid data that showed a larger-than-expected decline in weekly U.S. crude inventories, but an unexpected build in gasoline inventories.
Crude inventories dropped by 3.2 million barrels last week, compared with analysts' expectations for a draw of 1.1 million barrels, the Energy Information Administration said on Wednesday.
In big tech, Amazon (NASDAQ:AMZN) was in the spotlight after the e-commerce giant reportedly warned certain third-party sellers that antitrust laws approved in June could limit their ability to sell on Amazon.
Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL), and Microsoft (NASDAQ:MSFT closed below the flatline.
On the vaccine front, The U.S. government said it plans to make Covid-19 vaccine booster shots widely available starting on Sept. 20 amid concerns over the rising Covid-19 infections.
Moderna Inc (NASDAQ:MRNA), Pfizer Inc (NYSE:PFE), and BioNTech SE (NASDAQ:BNTX) were in the red. The boosters would be for those who received the Pfizer or Moderna shots, but not yet for those who received Johnson & Johnson (NYSE:JNJ)'s one-dose vaccine.
In other news, ViacomCBS and NBCUniversal-parent Comcast (NASDAQ:CMCSA) teamed up on a new streaming service, “SkyShowtime,” expected to launch in Europe next year. ViacomCBS (NASDAQ:VIAC) climbed nearly 4%.