Stocks pause after Fed-fueled record run

September 19, 2013: 4:22 PM ET
u.s. stocks, dow
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NEW YORK (CNNMoney)

Investors seemed a bit hung over Thursday as stocks were mixed a day after the Federal Reserve's surprise decision to keep its stimulus in place lifted two key market indexes to all-time highs.

The Dow Jones industrial average and S&P 500 fell a bit, while the Nasdaq ended only slightly higher. Earlier, a modest bump in the S&P 500 was enough to push it to another record high.

Though stocks have surged this year, many analysts think the broader market still remains attractive.

The S&P 500 is currently trading at about 16.5 times earnings from last year, just slightly above the historical average of 16, according to Bank of America Merrill Lynch data. In the bubble days of 2000, the index was trading at nearly 30 times trailing earnings.

Related: World markets gain following Fed decision

The benchmark index is also fairly valued when using earnings estimates for next year. According to Bank of America Merrill Lynch's expectations, the S&P 500 is trading at less than 15 times 2014 earnings estimates. And analysts at the banks are predicting profit growth of 6% next year, following an increase of 5% in 2013.

Bank of America Merrill Lynch equity and quantitative strategist Savita Subramaniam adds that Corporate America's balance sheets are much healthier now than they were during the recession. So a small premium might be justified.

Plus, stocks are especially attractive compared to bonds. Michael Sheldon, chief market strategist of RDM Financial Group, said he expects economic and earnings growth to pick up over the next several quarters. In addition, interest rates and inflation remain low. That's usually a better environment for stocks than bonds.

On the economic front, U.S. jobless claims rose last week but were below expectations. Analysts expected a higher figure because the previous reading was distorted due to two states reporting incomplete results. And existing home sales unexpectedly rose in August to an annual rate of almost 5.5 million, according to the National Association of Realtors. That's the highest rate since February 2007.

Related: Fear & Greed Index returns to greed mode

What's moving: Shares of Take-Two Interactive (TTWO) rose after the company said its latest game, Grand Theft Auto V, raked in $800 million in worldwide retail sales on Tuesday, the day it was released. The increase in Take-Two is yet another home run for Carl Icahn, who is the biggest shareholder of the company. Icahn has had huge success this year with stakes in Netflix (NFLX) and Herbalife (HLF) as well.

Record GTA V sales boost Take-Two

Despite the impressive sales numbers, StockTwits users remained cautious.

"$TTWO One record shattering release a long term successful company does not make... Need to see what else they have up their sleeve," noted xraystocktrader.

Meanwhile, Tesla (TSLA) shares rallied to a record high after analysts at Deutsche Bank raised their price target to $200 per share. While Tesla is a favorite among StockTwits traders, one trader noted the enthusiasm and momentum might be a little too strong.

"$TSLA getting a little over-stupid here as many calling it the new $AAPL. Don't get me wrong love $TSLA but up 400%+ 6months," said TraderPaul.

Groupon (GRPN) shares jumped after Stifel Nicolaus analysts upgraded the stock to buy from hold. Shares of fellow social media stock Facebook (FB) advanced to an all-time high above $46 per share. At least one trader seemed to favor Groupon over Facebook.

"$GRPN 50 million app downloads, $FB 100 million app dl's. $GRPN sells things, $FB doesn't. $GRPN next baby $AMZN / $SQUARE potentially Bullish," said sogenerous.

JPMorgan Chase (JPM) agreed Thursday to pay about $920 million in fines to U.S. and U.K. regulators to settle charges related to the "London Whale" trading debacle.

Markets
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Index Last Change % Change
Dow 17,810.06 91.06 0.51%
Nasdaq 4,712.97 11.10 0.24%
S&P 500 2,063.50 10.75 0.52%
Treasuries 2.32 -0.02 -0.86%
Data as of 1:50pm ET
Company Price Change % Change
Bank of America Corp... 17.12 0.12 0.71%
Kinder Morgan Inc 39.75 -0.17 -0.43%
Apple Inc 116.47 0.16 0.14%
Intel Corp 35.59 -0.36 -1.00%
Microsoft Corp 47.98 -0.72 -1.48%
Data as of Nov 21