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A Federal Reserve far more hawkish than expected sent stocks to session lows on Wednesday, Sept. 20. The Dow Jones Industrial Average was down 0.2%, the S&P 500 fell 0.34% and the Nasdaq eased 0.7% Wednesday afternoon shortly after the Federal Open Market Committee issued a post-meeting communique that the market interpreted as boosting odds of a December federal funds rate hike.

All benchmark indexes had closed at records a day earlier -- the Dow for the sixth day in a row and the S&P 500 for its third.

The FOMC announced after its latest regularly scheduled interest-rate meeting that it would hold the fed funds rate in a 1%-to-1.25% range, meeting economist expectations. As expected, the Fed also said that it would begin unwinding its massive balance sheet, beginning with a $10 billion-a-month wind-down. However, plans call for that amount to increase by $10 billion a quarter and reach $50 billion a month by this time next year. The Fed holds $4.5 trillion in Treasury securities and mortgage-backed assets on its balance sheet. 

However, Fed members sounded far more hawkish on the future path of rate hikes than markets had expected. Investors had predicted that the Fed would slow down rate hikes as the U.S. economy faces consistently soft inflation, coupled with wage growth that's stuck in neutral. But 12 of the 16 FOMC members said in Wednesday's communique that they anticipate a third rate hike this year, while 11 of the 16 anticipate three hikes next year. 

Fed funds futures priced in a 70% chance of a December increase following that announcement -- far higher than a 51% chance prior to the meeting. A 25-basis-point increase at the December meeting would put the federal funds rate at 1.25% to 1.5%.

Markets are closely watching Fed chair Janet Yellen's news conference for more hints of the central bank's thinking. "Inflation remains the wildcard of Fed policy, and the temporary boost to gasoline prices following the hurricanes only clouds the picture further," chief financial analyst Greg McBride said. "Whether the Fed hikes in December will remain an open question until December."

Meanwhile, Apple Inc. (AAPL) - Get Free Report  weighed heavily on tech. The world's largest company dropped more than 1% after confirming the new Apple Watch had encountered connectivity issues. The Apple Watch Series 3 is the first model to independently connect to networks rather than through an iPhone.

In a statement to The Verge, Apple said its new watch had issues connecting to cellular networks when already using unauthenticated WiFi networks without connectivity. Apple said it was "investigating a fix for a future software release."

Other tech laggards included Oracle Corp. (ORCL) - Get Free Report , Alibaba Group Holding Ltd. (BABA) - Get Free Report , Facebook Inc. (FB) - Get Free Report , Microsoft Corp. (MSFT) - Get Free Report  and Texas Instruments Inc. (TXN) - Get Free Report . The Technology Select Sector SPDR ETF (XLK) - Get Free Report declined by 0.3%. 

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Adobe Systems Inc. (ADBE) - Get Free Report  also fell 3.5% even after fiscal third-quarter earnings from the software company topped Wall Street estimates. Net income in the quarter was 84 cents a share, up from 54 cents a year earlier. Adjusted earnings were $1.10 a share, topping forecasts of $1.01. Revenue rose to $1.84 billion; analysts expected $1.82 billion.

Elsewhere in the market, FedEx Corp. (FDX) - Get Free Report  was higher after the shipping giant posted fiscal first-quarter earnings below analysts' expectations, blaming the miss on a cyber attack at TNT Express and Hurricane Harvey. Adjusted first-quarter earnings for FedEx were $2.51 a share, below Wall Street estimates of $3.09. The company also lowered its adjusted earnings forecast for fiscal 2018.

Separately, General Mills Inc. (GIS) - Get Free Report  tumbled 6% after the maker of Cheerios posted fiscal first-quarter profit and sales that missed expectations. Earnings of 71 cents a share missed consensus by a nickel, while revenue slipped nearly 4% to $3.77 billion. Organic sales declined by 4%, while gross margins slipped by 230 basis points to 35.1%. 

Bed, Bath & Beyond Inc. (BBBY) - Get Free Report  fell 15% after a disappointing quarter. Second-quarter profit slumped to 67 cents a share from $1.11 a share a year earlier, coming in well below targets of 93 cents. Sales of $2.99 billion missed estimates of $3 billion. The homewares retailer said restructuring charges, a new method of accounting, and the impact of Hurricane Harvey had impacted the bottom line. 

Ford Motor Co. (F) - Get Free Report   announced plans to trim production at five North American assembly plants through the rest of 2017 as demand for new vehicles in the U.S. slips because of lower gas prices. Ford plans a two-week shutdown at its plant in Flat Rock, Mich., which makes the Mustang and Lincoln Continental, and a one-week shutdown at its Michigan Assembly Plant, which makes the Focus and C-Max small cars. The automaker also plans to idle Transit van production at its Kansas City, Mo., plant for two weeks.

Ford also plans shutdowns of up to three weeks at two plants in Mexico. U.S. sales at Ford have declined 4% through August compared with the same period a year ago.

3M Co. (MMM) - Get Free Report declined after JPMorgan cut its rating to underweight from neutral, though raised a price target to $201 from $185. Analyst Stephen Tusa said the risks tied to slowing demand in auto and electronics should undercut a recent rally. In a note, he said "We see a negative skew on the risk reward, with potential downside catalysts including negative consensus revisions and stubbornly weak U.S. price performance which would reinforce concerns around channel disruption."

Pfizer Inc. (PFE) - Get Free Report  was a gainer on the Dow after Morgan Stanley upgraded its rating to overweight from neutral and raised its price target on the stock to $39 from $35. Analyst David Risinger wrote in a note that "underperformance" had led to an upgrade and that the stock shows "favorable risk-reward and M&A optionality." Tax reform could lead to better deal opportunities.

In other market-moving news, oil stockpiles ballooned again in the past week as the fallout from Hurricane Harvey continued. U.S. crude inventories rose by 4.6 million barrels in the past week, according to the U.S. Energy Information Administration. The previous two weeks have shown a large increase in stockpiles as Harvey crippled refinery production in the Texas and Louisiana region. Gasoline and distillate stocks declined. West Texas Intermediate crude for November delivery settled 1.6% higher at $50.69 a barrel on Wednesday.

Energy gains countered losses in the technology space, balancing out markets and keeping stocks close to neutral. Major oil producers such as Exxon Mobil Corp. (XOM) - Get Free Report , Chevron Corp. (CVX) - Get Free Report , ConocoPhillips (COP) - Get Free Report , Halliburton Co. (HAL) - Get Free Report and Royal Dutch Shell PLC (RDS.A) were all higher on Wednesday. The Energy Select Sector SPDR ETF (XLE) - Get Free Report increased 0.7%.

Elsewhere, U.S. existing home sales fell 1.7% in August to a seasonally adjusted pace of 5.35 million. The drop was its first in five months as tight supply restricted demand. Economists had expected a reading of 5.44 million.

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Outside the United States, the death toll following a massive earthquake in central Mexico continued to climb. Rescuers searched for survivors of Mexico's deadliest earthquake in decades as the number of confirmed fatalities stood at 217, according to The Associated Press. The magnitude-7.1 quake on Tuesday struck on the 32nd anniversary of the 1985 earthquake that killed thousands.

And in weather-related devastation, Puerto Rico was bracing for Hurricane Maria landfall just days after Hurricane Irma caused severe destruction. The Category 4 storm was downgraded, though it's still expected to bring winds of up to 155 mph and cause more damage than Irma.

Updated from 2:12 p.m. ET, Sept. 20. 

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