Stocks finished lower Thursday after the Federal Reserve signaled it would keep interest rates low through at least 2023 and Fed Chairman Jerome Powell said the U.S. economy would continue to struggle without help from Congress.
Also pressuring equities were economic data that pointed to a U.S. economy that continues to reel from the coronavirus pandemic.
The Dow Jones Industrial Average ended down 130 points, or 0.47%, to 27,901, the S&P 500 declined 0.84% and the Nasdaq fell 1.27%.
"The Fed is out of tools and stock investors are finally realizing this," said Greg Swenson, founding partner of Brigg Macadam, a London-based investment bank.
"With rates this low and quantitative easing ramped up, there is little the Fed can do to help the economy rebound or limit the fallout from any unexpected economic weakness in the near-term."
Powell said Wednesday a U.S. economic recovery would depend largely on how well the country controls the coronavirus pandemic.
“A full economic recovery is unlikely until people are confident that it is safe to re-engage in a wide variety of activities,” Powell said.
The Fed chairman reiterated that further fiscal stimulus was needed after additional unemployment benefits expired.
Congress has been deadlocked on the size of the next coronavirus aid bill.
“When I look at where the stimulus talks are, the odds of something getting done are very, very slim,” said Joyce Chang, JPMorgan Chase's global head of research. “Both sides are far apart.”
Another 860,000 Americans filed for first-time unemployment benefits last week, a slight drop from the previous week’s level, and a sign of gradual improvement in the labor market.
But while initial claims for jobless benefits have stabilized just below 900,000 in recent weeks, they still remain above the highest level before this year on record, which was 671,000 in September 1982.
Housing starts in August fell 5% at a seasonally adjusted annual rate of 1.42 million, and a reading on manufacturing activity in the Philadelphia region declined in September.