US close: Stocks fall for third straight day in FOMC aftermath

After struggling for direction for most of the session, the Dow Jones Industrial Average dropped into the red by the close, finishing down 0.3% at 33,964, while the S&P 500 fell 0.2% to 4,320 and the Nasdaq slipped 0.1% to 13,212.

US markets had been in retreat mode since Wednesday, after the Federal Open Market Committee suggested that an interest rate hike was probable before the end of the year.

While policymakers kept rates unchanged at the 5.25-5.5% range at this month's meeting, they predicted that rates would likely stay around the 5% level for the whole of 2024 as they commit to a 'higher-for-longer' approach.

In US economic data on Friday, the S&P Global services purchasing managers' index (PMI) slipped from 50.5 to 50.2 in September, surprising analysts who had expected a rise to 50.6.

The manufacturing PMI came in ahead of forecasts, rising 47.9 to 48.9 (consensus: 48) but still remained below the 50 level that separates growth and contraction.

Digesting the Fed's comments

"The Fed sees a stronger economy unfolding than it did in its previous economic projections three months ago. Hence, it also believes that it can withstand higher interest rates that, despite progress made on the inflation front, is needed for the final leg of the inflation fight," explained analyst Bob Schwartz from Capital Economics.

"The ghost of the 1970s still haunts policymakers, who fret that a premature easing of policy could reignite the inflation embers, as was the case 50 years ago."

The meeting, along with stronger-than-expected jobless claims figures, resulted in a sell-off in government bonds on Thursday, with the yield on a 10-year Treasury surpassing the 4.5% mark for the first time since 2007. Yields pulled back to the 4.45% mark on Friday.

Bank of America analysts, in their latest 'Flow Show' report, said a higher-for-longer strategy raises the risks of a hard landing. "We believe ‘lower-for-longer’ rates and yields caused bubble and boom in 2010s and 2020/21," the bank wrote. "‘Higher-for-longer’ means hard landing risks and [bubble] pops and busts in the first half of 2024."

Streaming companies in focus

Amazon gave up earlier gains to finish down 0.2% on the news that the online giant was expected to add commercials to its Prime Video streaming service in early 2024 as it attempts to generate more cash.

Sector peers Paramount, Walt Disney and Netflix fell with the Writers Guild of America and The Alliance of Motion Picture and Television Producers back at the negotiating table. The WGA negotiating committee said on Friday that it was meeting again with the AMPTP again at the weekend yet still asked "as many [WGA members] to come out to the picket lines tomorrow".

ADRs of newly-listed chipmaker Arm Holdings remained under pressure with the shares falling a further 1.6% to $51.32, marginally above the IPO price of $51.

Meanwhile, Fox Corp was down on the news that Rupert Murdoch was stepping down as chairman, with his son Lachlan jumping in to head the ship.