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Dow, S&P snap 4-day rally as Fed euphoria fizzles; Groupon spikes 9%

Stocks closed near session lows Thursday, with the Dow and S&P 500 easing off their all-time highs, as investors largely shrugged off a batch of upbeat economic reports and a day after the Federal Reserve surprised global markets by maintaining its bond-buying program.

(Read more: After-hours buzz: JCPenney, AK Steel, Texas Instruments & more)

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The Dow Jones Industrial Average slumped 40.39 points to close at 15,636.55, dragged by UnitedHealth and Hewlett-Packard. The blue-chip index traded in a narrow 70-point range.

The S&P 500 slid 3.18 points to end at 1,722.34, after setting an intraday high of 1,729.86 shortly after the open. Still, both the Dow and S&P are on track for their biggest monthly gains since October 2011.

The Nasdaq edged up 5.74 points to finish at 3,789.38 after briefly hitting a new 13-year high.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, slid near 13.

Among key S&P sectors, utilities and financials led the decliners. Techs closed modestly higher.

"The market is pretty good at taking to account pretty quick developments—I think what people need to be reminded of is what the Fed inaction does is prolong the uncertainty," said Scott Clemons, chief investment strategist at Brown Brothers Harriman Wealth Management. "I think investor attention within the next few weeks will pivot away from monetary policy to corporate earnings."

On Wednesday, Fed Chairman Ben Bernanke said the central bank was not ready to cut back on stimulus measures, citing tightening financial conditions that could hurt employment. The decision surprised Wall Street analysts who had expected a $10 billion to $15 billion reduction in the central bank's $85 billion-a-month bond purchases.

Stocks ripped higher following the announcement, with the Dow and S&P 500 setting fresh highs.

The Fed cited rising mortgage rates for its decision, and also blamed Washington, where Congress is heading toward another showdown on the debt ceiling. On Wednesday, President Barack Obama told a gathering of business leaders that Washington was stuck in a stalemate over budgets, debt and healthcare costs, leaving government unable to function properly.

"Federal fiscal policy continues to be a restraint on growth and a source of downside risk," Bernanke said in a press conference following the Fed announcement.

(Read more: Next up for the market? Government shutdown!)

Gold prices hit a one-week high as the dollar fell near a seven-month low against a basket of major currencies following the Fed announcement.

Asian and European equity markets enjoyed a risk-on rally on. Emerging markets led the gains, as investors searched for higher-yielding assets, on the expectation that the Fed's continued liquidity boost would benefit these countries.

Daiwa's Chris Scicluna said the Fed's silence on when it might start tapering suggested it might not start scaling back stimulus measures until 2014.

"The FOMC (Federal Open Market Committee) again was content to leave uncertainty persisting over quite when exactly it might start to taper, with (Chairman Ben) Bernanke emphasizing that there is no fixed time-table, and that the Committee's decisions about the pace of purchases will be data-contingent, as well as dependent upon a cost-benefit analysis of the program. So, while still possible, there is far from a done deal that tapering will start by year-end," Scicluna said in a research note.

Walt Disney declined a day after the media conglomerate delayed the release of two of its Pixar movies.

Groupon spiked nearly 10 percent, posting its best gain since June, after Stifel raised its rating on the daily-deal site to "buy" from "hold."

Agilent Technologies rallied to lead the S&P 500 gainers after the bio-analytical equipment maker said it will spin off its electronic measurement businesses into a public company by the end of next year.

JPMorgan Chase edged higher after the financial giant said it 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.

Among earnings, Rite Aid shot higher after the drugstore chain lifted its earnings forecast for the year after posting a fourth-straight quarterly profit.

ConAgra slipped after the packaged foods maker forecast current-quarter earnings below expectations, due to weakness in its consumer foods division.

On the economic front, existing home sales gained 1.7 percent to an annual rate of 5.48 million units in August, hitting a 6-1/2 year high, according to the National Association of Realtors. Economists polled by Reuters had expected a 5.25 million-unit rate.

The Philadelphia Federal Reserve Bank said business activity in the U.S. mid-Atlantic region jumped to 22.3 in September, increasing by the most in more than two years, blowing past expectations for a reading of 10.0. Any reading above zero indicates expansion in the region's manufacturing.

And leading indicators advanced by more than expected in August, according to the Conference Board.

Meanwhile, weekly jobless claims rose 15,000 to a seasonally adjusted 309,000, according to the Labor Department. But analysts said the reading was distorted as two states were still working through a backog of unprocessed claims from last week.

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

On Tap This Week:

FRIDAY: Fed's George speaks, Fed's Bullard speaks, Fed's Kocherlakota speaks, quadruple witching, new iPhones in stores

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