Stocks shaved off some of their earlier losses as techs staged a late-afternoon rally, but still closed mixed as investors considered news that the Federal Reserve may not provide as much stimulus to the economy as had been anticipated.
The Dow Jones Industrial Average closed down 43.18 points, or 0.4 percent to close at 11126.28, clawing back after dropping more than 148 earlier in the afternoon. This comes after the blue-chip index eked out a gain in the previous session.
McDonald's , Merck ,and Alcoa were the blue-chip laggards, while Bank of America and AmEx closed higher.
The S&P 500 closed down 3.19 points, or 0.3 percent to end at 1182.45, snapping a five-day winning streak. Meanwhile, the tech-heavy Nasdaq rose 5.97 points, or 0.2 percent to finish the session at 2503.26. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose nearly 5 percent to above 21.
Stocks had been rising in recent weeks because of some mostly upbeat earnings and mounting expectations that the Fed would embark on another round of bond-buying to stimulate the economy.
Traders have been anticipating the Fed would buy between $500 billion and $1 trillion in Treasurys to drive interest rates lower and encourage lending and spending. However, a report in The Wall Street Journal said the Fed's bond purchases might amount to a few hundred billion dollars over several months, which would fall short of those predictions.
The report came a day after William Dudley, the president of the Federal Reserve Bank of New York, said the central bank cannot fix the sluggish economy immediately.
Meanwhile, fund manager Jeremy Grantham, released an attack on the Fed policiesin a note to clients, calling the strategy of "manipulating asset prices through artificially low rates and asymmetric promises of help in tough times" dangerous and destabilizing to the economy.
The prospect of the Fed buying fewer bonds than the market had anticipated "is probably the biggest factor weighing on the markets today," said Michael Sheldon, chief market strategist at RDM Financial Group.
But Sheldon said the news may simply be an excuse some investors to take profits, considering stocks have risen considerably over the past several weeks.
"The prospects of more quantitative easing, the upcoming election and positive third quarter earnings have provided the fuel to send the market higher in recent weeks," Sheldon said. "We’ve now had a significant rally; if one of those legs is removed, that could provide a short term excuse for the market to pull back somewhat."