U.S. stocks closed lower Thursday as investors eyed oil prices and economic data, after the Federal Reserve on Wednesday made the widely expected move of raising rates.
“The action we saw yesterday I think was a relief rally. … This morning I think the market has moved beyond that. Oil continues to fall this morning. Energy shares have fallen and that has dragged the market down with it,” said David Schiegoleit, managing director of investments at U.S Bank Private Client Reserve.
Analysts also noted markets could see some volatility ahead of options expiration Friday.
The Dow transports fell more than 1.5 percent in afternoon trade, withKirby leading decliners.
“This market’s kind of just back and forth because of a lot of hot money. A lot of it’s commodities. There’s a lot of positioning going on,” said Bernie Williams, chief investment officer, Investment Solutions, USAA Wealth Management.
Energy briefly fell 2 percent to lead nearly all S&P 500 sectors lower in afternoon trade. Only utilities tried for gains.
U.S. crude settled down 57 cents, or 1.6 percent, at $34.95 an ounce. Brent remained near multi-year lows.
“The markets are a little worried about how strong the U.S. economy is, how much strong dollar it can take, and commodities (declining) again,” said John Bredemus, vice president at Allianz Investment Management.
The U.S. dollar extended gains to trade almost 1.5 percent higher against major world currencies, with the euro near $1.080. The yen was near 122.80 yen against the greenback as of 2:52 p.m.
Nick Raich, CEO of The Earnings Scout, said the Fed’s move is “not going to remove macroeconomic uncertainty.”
“Most of the economic data, revenue data we’ve collected is not getting better. It’s getting worse. The uncertainty is not being lifted by any measure for the overall economy,” he said.
In economic news, the Philly Fed index for December was minus 5.9, the lowest of the year after a positive 1.9 print in November.
Leading indicators for November showed a 0.4 percent rise, with October unrevised, up 0.6 percent, according to StreetAccount. Initial claims came in at 271,000.
The U.S. current account deficit in the third quarter increased 11.7 percent to $124.1 billion, its highest level in nearly seven years, as a strong dollar weighed on exports and the profits of multinational corporations, the Commerce Department said.
European stocks ended higher, off session highs, while Asian equities closed higher with the Nikkei up more than 1.5 percent.
As most expected, the U.S. central bank on Wednesday raised its target funds rate by a quarter point, while emphasizing a gradual and data-dependent pace of future tightening. The hike was the first since June 2006.
“It was pretty much everything they said they were going to do. Obviously the rate hike was a quarter-point which they telegraphed, and (they remained) accommodative,” said Peter Coleman, head trader at Convergex.
“The continued problem we have is still oil going down. … If you see a significant drop in oil you probably see a drop in the market again on a short-term basis,” he said. Still, “you got some certainty (on the Fed). You may see some sector rotation.”
U.S. stocks rallied after the Fed announcement Wednesday afternoon to close sharply higher, with the S&P 500 in the green for 2015. In intraday trade Thursday, the S&P struggled to remain in positive territory for the year so far.
In corporate news:
General Mills missed on both the top and bottom line. The food producer saw revenue drop in all its retail categories, but the company did say the results are in line with its expectations.
Accenture missed on earnings but beat on revenue due to growth at its consulting business.
FedEx posted earnings that topped on both the top and bottom line. The delivery firm attributed the outperformance to larger profit margins and lower costs, among other factors.
Oracle beat on earnings but missed on earnings, under pressure from the strong dollar. The business software company gave lower-than-expected numbers for the current quarter as it continues its transition from traditional software to a cloud-based subscription model.
Apple announced Thursday that Jeff Williams has been named chief operating officer. Williams joined the company in 1998 and has overseen the company’s entire supply chain since 2010.
The major U.S. averages are still on track for weekly gains of nearly 2 percent for the week so far, as of afternoon trade Thursday.
The S&P 500 traded down 21 points, or 1.01 percent, to 2,051, with energy leading nine sectors lower and only utilities holding higher.
The Nasdaq composite traded down 42 points, or 0.84 percent, at 5,028.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 17.5.
About three stocks declined for every two advancers on the New York Stock Exchange, with an exchange volume of 562 million and a composite volume of 3.0 billion as of 2:56 p.m., ET.
—CNBC’s Peter Schacknow contributed to this report.