Stocks closed lower on Wednesday as a grim outlook on the economy from the Federal Reserve thwarted the enthusiasm around a record valuation for Apple.
In the minutes from its July meeting, the Fed said "the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term." The Fed kept rates unchanged last month, noting the economy was still in need of monetary support.
That comment knocked the S&P 500 from an intraday record set earlier in the session. The Dow and Nasdaq also turned negative after the minutes were released. Treasury yields, meanwhile, rose following the release along with the U.S. dollar. Gold prices fell on the news.
Earlier in the day, the major averages rose as Apple became the first U.S. company to reach a market cap of $2 trillion. With that milestone, Apple officially doubled its valuation in just over two years. In 2020 alone, Apple has surged nearly 60% and was one of the stocks leading the market off its coronavirus lows. The stock closed well off its highs, eking out a gain of just 0.1%.
"The momentum in Apple was clearly pointing to this [record market cap] becoming self-fulfilling," said Art Hogan, chief market strategist at National Securities. "While it's got an elevated valuation, it's on the precipice of massive new cycles of hardware with the roll-out of 5G."
"The company has also done a great job of being shareholder friendly," said Hogan, referring to Apple's recently announced stock split, the company's dividend and buybacks along with "reinvesting in its ecosystem."
Wednesday's moves came a day after the S&P 500 broke above its high from Feb. 19 to confirm the start of a new bull market. The Nasdaq Composite also notched a record on Tuesday.
"Reaching a new all-time high may be a quickly forgotten speed bump in an ongoing new bull market, but if not substantially passed in the coming weeks, it could also prove to be a nagging glass ceiling that will continue to perpetuate fears this really is just a big bear market rally," Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC.
"Bulls need to ask whether the stock market may finally be getting ahead of its fundamentals while bears are forced to ask whether they are too underweighted in what could be just the beginning of a new bull market," Paulsen said.
To be sure, the market could become more volatile moving forward.
Coronavirus cases in the U.S. are trending lower, but officials are cautious as students begin returning to school and college campuses. Some colleges have been forced to change to all online learning because of outbreaks.
Meanwhile, Treasury Secretary Steven Mnuchin criticized Democratic leaders as unwilling to discuss a smaller relief package on Tuesday; however, Politico reported House Speaker Nancy Pelosi said she is was willing to cut some demands to get an agreement on the bill.
In corporate news, Target rose more than 12% after the retailer reported soaring profit and sales last quarter. Digital sales increased by 197% from a year ago. Lowe's shares gained 0.2% after the home improvement retailer reported a 30% surge in second-quarter revenue.
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