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 fell 0.16%, the S&P 500 fell 0.18%, and the Nasdaq slid 0.26%. The Dow and S&P 500 closed at records a day earlier -- the Dow for the seventh day in a row and the S&P 500 for its fourth. The Dow briefly hit an all-time intraday high before returning to the red. 

Tech stocks were the worst performers on Thursday. Apple Inc. (AAPL) 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 Amazon.com Inc. (AMZN) , Micron Technology Inc. (MU) , Alibaba Group Holding Ltd. (BABA)  and Broadcom Ltd. (AVGO) moved lower. The Technology Select Sector SPDR ETF (XLK) declined by 0.3%. 

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

After the long-awaited Fed meeting, markets appeared to struggle to find means to drive 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 anticipate 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%.

Inflation remains the Fed's main cause of worry. 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," said Yellen. "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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New sanctions have been levied against North Korea, President Donald Trump announced on Thursday. Trump said a new executive order would allow the federal government to issue punitive measures against individuals and banks and other companies that trade with North Korea. 

"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 effect of Hurricane Harvey began to filter out of the results and the impact of Hurricane Irma on claims on Florida came in 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 a reading of 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-. This marks the first downgrade on 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)  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's Action 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)   fell back even after a report said Tesla Inc. (TSLA) would be developing its own chip for handling autonomous driving tasks on top of intellectual property from AMD. Industry peer Nvidia Corp. (NVDA) also declined. 

In other deal news, Calgon Carbon Corp. (CCC) 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. 

General Motors Co. (GM) was slightly higher after Morgan Stanley named the automaker as its top pick in the U.S. industry. Analyst Adam Jonas believes the company will hold an investor day before the year's end to talk strategy. 

Updated from 1:06 p.m. ET, Sept. 21. 

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