Why Stocks Fell Back After Briefly Rallying on Fed Minutes

NEW YORK (TheStreet) - It was fun while it lasted.

After a brief rally following the release of the Federal Reserve's October minutes, stocks ended up on a blah note. The major averages closed slightly lower, just off their record highs.

Despite a slew of retailers' earnings and housing data in the morning, the only thing investors seemed to care about was the Fed minutes. Once they came out mid-afternoon, the market seemed to think the Fed was signaling that rates would remain at historic lows even after its economic targets were reached. Stocks quickly rallied.

But then that sentiment melted away and the market decided there was nothing new in the Fed minutes after all. Stocks quickly fell back.

In the end, it was another day of minor moves, which has been the case with stocks all week.

For those keeping score at home, the Fed minutes were essentially from the same playbook as the past few months: inflation remains a concern, there's still bickering as to when the central bank should raise interest rates, and members promise to keep an eye out for curveballs from global markets.

"I don't think there were any surprises," Wells Fargo's chief fixed income strategist Brian Rehling said on a call. "There was no specific discussion about when the Fed might remove the 'considerable time' language, although it was mentioned but no hints as to if that will come at the next meeting and definitely no hints regarding when interest rates may begin to increase."

As for the all-important rate hike timetable, the Fed appeared comfortable with raising interest rates next year, though some argued for the removal of the "considerable time" phrasing which had accompanied recent statements to be replaced by language more explanatory of their current position.

"Many participants observed the committee should remain attentive to evidence of a possible downward shift in longer-term inflation expectations," the statement read. "Some of them noted that if such an outcome occurred, it would be even more worrisome if growth faltered." Members said inflation was likely to edge lower in the short term, farther from the Fed's 2% target, though would pick up again in the medium term.

Even though the S&P 500 settled 0.15% lower in the afternoon session, record highs set a day earlier were within its reach. "The stock market seems to be continuing to be supported by the economic data in general," Sterne Agee chief economist Lindsey Piegza said in a phone call. "It almost seems like the market is cherry-picking the data, finding the positive green shoots to suggest that the U.S. is on firmer footing."

The weak link of the day belonged to tech names which dragged the Nasdaq 0.57% lower. Netflix (NFLX) shares dropped nearly 5% after takeover speculation emerged from The Financial Times, while BlackBerry (BBRY) shares tumbled 5.3% after getting hit with a downgrade from Morgan Stanley. Analysts said the market is currently too optimistic on the company's turnaround. Morgan Stanley analysts also snipped 2015 earnings estimates for Tesla (TSLA) which plunged shares 4.2% lower.

--Written by Keris Alison Lahiff in New York.

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