U.S. stocks closed lower on Friday, with energy falling more than 1 percent, as oil prices fell sharply while investors digested key manufacturing data, following two strong sessions.
"You never know what's going to happen with these OPEC meetings," said Robert Pavlik, chief market strategist at Boston Private Wealth. "You have Saudi Arabia offering a cut, but for that to happen Iran would have to agree to a [production cap]."
U.S. crude prices extended losses in late-morning trade and settled 3.97 percent lower at $44.48 per barrel after Bloomberg reported Saudi Arabia doesn't see an output deal being reached at Monday's meeting in Algeria.
"I'm not buying into any OPEC freeze, but we still think oil is going to trend up," said John Conlon, chief investment officer at People's United Wealth Management.
"The market is consolidating these strong gains following the Fed," said Quincy Krosby, market strategist at Prudential Financial. "I think the market is going to focus on oil prices after the Saudi Arabia report. Oil could be another driver in the market."
WTI intradaySource: FactSet
The S&P 500 fell 0.6 percent, with energy leading decliners. The real estate sector, which began trading earlier this week, rose approximately 0.4 percent Friday and led all 11 sectors for the week.
"The S&P futures met resistance yesterday after gapping up on improved short-term momentum. We expect resistance to be surmounted after a brief pause refreshes the intraday uptrend," said Katie Stockton, chief technical strategist at BTIG, in a note to clients.
The Nasdaq composite dropped 0.55 percent as shares of Apple fell 1.67 percent after a report from GfK supposedly raised concerns about the latest iPhone's sales. The three major indexes still posted weekly gains of around 1 percent, but snapped a three-day winning streak.
The September read on the Markit Manufacturing Flash PMI came in at 51.4, below the August read of 52.0. IHS Markit, the firm that released the data, said that the September number marked seven years of continuous growth in manufacturing, but that the "headline index was below the average seen over this period (54.0) and remained close to the post-crisis low recorded in May (50.7)."
"After falling into contraction in August as measured by the ISM survey, the September data looks no better. The NY and Philly manufacturing indices seen last week imply another below 50 print and this Markit report reflects relatively stagnant activity," said Peter Boockvar, chief market analyst at The Lindsey Group.
"As for a market response, they never do respond much to the Markit's US PMI and focus more instead on the ISM. This is in contrast to the Markit prints overseas as it's a good measure of international manufacturing and services," he said.
The data were released after the euro zone PMI showed that business activity in the 19-country region fell to 52.6 in September versus 52.9 in August and below market expectations. European equities fell Friday, with the pan-European Stoxx 600 index dropping around 1 percent.
Earlier this week, the Federal Reserve kept interest rates unchanged and hinted at a possible rate hike later this year. The central bank also lowered its economic forecasts for the next few years.
That said, three Fed officials dissented, expressing their desire for higher interest rates. Boston Fed President Eric Rosengren explained why he dissented on Friday, saying the sustainability of the economic expansion makes the case for raising interest rates compelling.
"Traders will spend far too much time obsessing over when the Fed will tighten next, yet nothing matters more for share appreciation than robust growth in light of extremely optimistic earnings forecasts for 2017 and forward multiples that already hover within an eyelash of their cyclical peak," Jeremy Klein, chief market strategist at FBN Securities, said in a note to clients.
S&P 500 week-to-dateSource: FactSet
Equities in the U.S. rallied following the Fed's decision, with the Nasdaq posting back-to-back record-setting sessions.
"I think the market is sort of realizing that monetary policy is losing its efficacy," said Michael Arone, chief investment strategist at State Street Global Advisors. "I think they are looking for the next new thing and they're hoping that it will be fiscal policy." He said that both U.S. presidential candidates are promising large increases in fiscal spending and that countries like Canada and Japan have also raised government spending trying to boost their economies.
People's United's Conlon said the Fed lowering its economic forecasts makes the upcoming earnings season "that much more important. The market is going to be taking a strong cue from what companies have to say."
The Bank of Japan also revamped its monetary policy earlier this week. "The signs out of both central banks is that they're going to stay accommodative for longer," said Chris Gaffney, president of EverBank World Markets. "I know Yellen hinted at a December rate hike, but if you look at the dot plots, they're going to be lower for longer."
U.S. Treasury yields fell following the decision. On Friday, the two-year note yield traded at 0.76 percent while the benchmark 10-year yield dropped to 1.61 percent. Prudential's Krosby said "if it pulls back more, it will be a question of by how much," adding sectors like real estate could benefit.
Dallas Fed President Robert Kaplan said he expects growth to rebound in the second half. Next week, a slew of Fed officials are expected to deliver remarks on the U.S. economy.
The U.S. dollar rose slightly against a basket of currencies, with the euro near $1.123 and the yen around 101.1.
In corporate news, Twitter's stock soared 21.42 percent, posting its best trading session of all time, after CNBC reported the firm has received expressions of interest from several technology or media companies and may receive a formal bid shortly.
The Dow Jones industrial average fell 131.01 points, or 0.71 percent, to close at 18,261.45, with Goldman Sachs leading decliners and Verizon the top advancer.
The S&P 500 dropped 12.49 points, or 0.57 percent, to 2,164.69, with energy leading nine sectors lower and real estate and telecommunications only advancers.
The Nasdaq fell 33.78 points, or 0.63 percent, to 5,305.75.
About three stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 811.33 million and a composite volume of 3.204 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 12.2.
Gold futures for December delivery settled $3 lower at $1,341.70 per ounce.
High-frequency trading accounted for 52 percent of September's daily trading volume of about 7.14 billion shares, according to TABB Group. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.