Equities slip as investors pause after rally on rate cut
Fed's Waller flags risk of inflation going too low
FedEx falls on quarterly profit drop, forecast trim
Nike jumps after appointing new CEO
Indexes down: Dow 0.22%, S&P 500 0.49%, Nasdaq 0.61%
Updated at 2:38 p.m. ET/1838 GMT
By Chuck Mikolajczak
NEW YORK, Sept 20 (Reuters) -U.S. stocks dipped on Friday, as investors paused after a strong rally in the prior session that was fueled by an upsized interest-rate cut by the Federal Reserve.
After notching their biggest daily percentage gains since mid-August, the S&P 500 and the Dow held close to record highs and, along with the Nasdaq, were poised for weekly gains of at least 1%.
Stocks briefly pared losses after comments from Fed Governor Christopher Waller increased expectations the central bank will cut interest rates by 50 basis points at its November meeting, having just cut by 50 bps on Wednesday.
Fellow Governor Michelle Bowman, however, maintained that a smaller Fed cut this week would have been preferred.
"The market is still trying to recalibrate because, yes, there were some market participants that may have expected 50 basis points but a lot of people didn't," said Sid Vaidya, U.S. chief wealth strategist at TD Wealth in New York.
"You have to be a little bit more selective and measured just because we are expecting growth to slow down a little bit and valuations, especially in large-cap growth, are a bit stretched so you want to be a bit selective."
The Dow Jones Industrial Average .DJI fell by 93.70 points, or 0.22%, to 41,931.84, the S&P 500 .SPX lost 28.24 points, or 0.49%, to 5,685.40 and the Nasdaq Composite .IXIC lost 109.51 points, or 0.61%, to 17,904.48.
Markets are fully pricing in a cut of at least 25 bps in November, with expectations for a cut of 50 bps given a 48.9% chance, according to CME's FedWatch Tool.
Nine of the 11 major S&P sectors were lower, with industrials .SPLRCI the worst-performing.
Utilities .SPLRCU surged, however, led by a jump of 21.58% in Constellation Energy CEG.O after the company signed a data center deal with Microsoft MSFT.O to help resurrect a unit of the Three Mile Island nuclear plant in Pennsylvania.
The Fed began its monetary-easing cycle on Wednesday and projected a period of steady economic growth and low unemployment and inflation.
Options and futures linked to stock indexes and individual stocks are set to expire simultaneously on Friday in an event known as "triple witching," which could exacerbate late-day volatility.
FedEx FDX.N plunged 13.92% after lowering its full-year revenue forecast, sending the Dow Jones Transport index .DJT down 3.39%.
Nike NKE.N jumped 5.55% after saying former senior executive Elliott Hill will rejoin the company to succeed John Donahoe as CEO.
Historically, equities have performed well in a rate-cutting environment. However, the outlook appears bleak with the S&P 500's valuations high above its long-term average.
Declining issues outnumbered advancers by a 2.06-to-1 ratio on the New York Stock Exchangeand by a 2.18-to-1 ratio on the Nasdaq.
The S&P 500 posted 26 new 52-week highs and one new low while the Nasdaq Composite recorded 82 new highs and 86 new lows.
S&P 500 valuation https://tmsnrt.rs/3MP0Yx0
Reporting by Chuck Mikolajczak; Editing by Rod Nickel
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