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A sharp selloff in tech stocks and a hawkish Federal Reserve teamed up on Thursday, Sept. 21, to drag markets from recent record highs.

The Dow Jones Industrial Average snapped a seven-day record-breaking streak, while the S&P 500 failed to end at all-time highs for the first day in four. The Dow declined 0.24% in its first down day in ten sessions, despite touching an intraday high. The S&P 500 fell 0.3%, and the Nasdaq slid 0.52%. 

After the long-awaited Fed meeting, markets appeared to struggle to find direction. The next expected catalyst, earnings season, isn't expected to kick off in earnest until October. 

The Federal Open Market Committee on Wednesday afternoon announced that it would leave the federal funds rate unchanged, a move widely telegraphed and largely expected. As predicted, the Fed also said that it would begin unwinding its massive balance sheet in October, beginning with a reduction of up to $10 billion a month. 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.

One surprise was that Fed officials sounded far more hawkish on the future path of rate hikes. Investors had predicted that the Fed would slow the pace of 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 project three hikes next year.

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

"In just two weeks it went from basically low probability to much higher probability," Alpine Funds' Mark Spellman said in a call.

Still, Spellman is still skeptical on whether a December hike will actually come to pass. "They can put it off until early next year," he added. Yellen "told us two or three years ago that PCE -- personal consumption expenditure -- needs to get to about 2% before ... inflation would be in a position where they'd have to take action from a monetary policy standpoint. It's never come close. We're still waiting for that."

In comments during a news conference, Fed Chair Janet Yellen conceded that inflation was running below the Fed's 2% target and that it was a "concern."

"For a number of years, there were very understandable reasons for that shortfall, and they included quite a lot of slack in the labor market, which my judgment would be has largely disappeared," she said. "This year, the shortfall of inflation from 2%, when none of those factors is operative, is more of a mystery. And I will not say that the committee clearly understands what the causes are of that."

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Tech stocks were the worst performers on Thursday. Apple Inc. (AAPL) - Get Free Report continued its descent, responding to reports of connectivity issues with its new Apple Watch model that surfaced earlier in the week. Other tech stocks including Inc. (AMZN) - Get Free Report , Micron Technology Inc. (MU) - Get Free Report , Alibaba Group Holding Ltd. (BABA) - Get Free Report and Broadcom Ltd. (AVGO) - Get Free Report moved lower. The Technology Select Sector SPDR ETF (XLK) - Get Free Report declined by 0.54%.

Apple and Broadcom are holdings in Jim Cramer'sAction Alerts PLUS Charitable Trust Portfolio.Want to be alerted before Cramer buys or sells AAPL or AVGO? Learn more now.

Geopolitically, President Donald Trump announced Thursday that new sanctions have been levied against North Korea. A new executive order would allow the federal government to issue punitive measures against individuals, banks and other companies that trade with the country, he said. 

"Foreign banks will face a clear choice: do business with the United States or facilitate trade with the lawless regime in North Korea," Trump said on Thursday. "The regime can no longer count on others to facilitate its trade and banking activities."

Weekly jobless claims in the U.S. saw a sharp decline in the past week as the effects of Hurricane Harvey began to filter out of the results and the impact of Hurricane Irma on claims in Florida appeared lower than expected. The number of new claims for unemployment benefits fell by 23,000 to 259,000, below an expected increase to 300,000. The less volatile four-week average rose by 6,000 to 268,750. 

Business and manufacturing conditions in the Philadelphia region showed unexpected growth in September. The Philadelphia Fed Business Outlook Survey increased to 23.8 this month, up from 18.9 in August. Analysts expected the reading to ease to 18. 

In international news, Standard & Poor's cut China's sovereign credit rating to A+ from AA- in the first downgrade of the nation's credit rating since 1999. However, the firm also upped its outlook to stable from negative. The credit rating said the revision was because "a prolonged period of strong credit growth has increased China's economic and financial risks." S&P still expects the country's economic performance to remain strong. 

Alphabet Inc.'s (GOOGL) - Get Free Report  Google reached a deal valued at more than $1 billion to buy part of the smartphone division of Taiwan's HTC Corp. Google will pay HTC $1.1 billion and receive a non-exclusive license for HTC intellectual property, while certain HTC employees, "many of whom are already working with Google to develop Pixel smartphones -- will join Google," the companies said in a joint news release. The companies said the transaction, subject to regulatory approvals, is expected to close by early 2018.

Alphabet is a holding in Jim Cramer'sAction Alerts PLUS Charitable Trust Portfolio.Want to be alerted before Cramer buys or sells GOOGL? Learn more now.

Shares of Advanced Micro Devices Inc. (AMD) - Get Free Report  fell even after a report that Tesla Inc. (TSLA) - Get Free Report would be developing its own chip for handling autonomous driving tasks on top of intellectual property from AMD. Industry peer Nvidia Corp. (NVDA) - Get Free Report also declined. 

In other deal news, Calgon Carbon Corp. (CCC) - Get Free Report roared higher by 62% after agreeing to be acquired by Japan's Kuraray Co. in a purchase worth $1.1 billion. Kuraray agreed to purchase the air-and-water purification company for $21.50 a share in an all-cash deal. The acquisition is expected to close by December. 

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