Wall Street set to open lower after Fed's hawkish stance

By Tanya Agrawal

(Reuters) - U.S. stocks looked set to open slightly lower on Thursday, a day after the Federal Reserve signaled it could raise interest rates for the third time this year despite low inflation and disclosed plans to shrink its balance sheet.

The Fed, as expected, said it would begin to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities - acquired in the years after the 2008 financial crisis - from October.

While the central bank left rates unchanged, it cited low unemployment, growth in business investment and an economic expansion that has been moderate but durable this year to build its case for another rate hike in 2017.

Interest rate futures are now pricing in about a 70 percent chance of a December hike, according to CME's FedWatch tool, up from above 50 percent prior to the Fed meeting.

Fed Chair Janet Yellen said the fall in inflation this year remained a mystery, adding that the central bank was ready to change the interest rate outlook if needed.

"The hint of a rate hike in December was no surprise to us and we reiterate our stand, that it is not likely to unravel the market's bullish posture in anticipation of tax cuts," said Peter Cardillo, chief market economist at First Standard Financial.

S&P 500 e-minis were down 1.75 points, or 0.07 percent, with 127 contracts changing hands at 8:32 a.m. ET (1232 GMT).

Nasdaq 100 e-minis were down 2.75 points, or 0.05 percent, in volume of 29 contracts.

Dow e-minis were down 10 points, or 0.04 percent, with 4 contracts changing hands.

The S&P and the Dow ended slightly higher on Wednesday, adding to their string of closing records, while the tech-heavy Nasdaq ended slightly lower weighed down by Apple.

U.S. stocks have continued to climb this year, with the S&P up about 12 percent so far, helped by strong corporate profits and optimism that U.S. President Donald Trump will cut business taxes.

Economic data showed the number of Americans filing for unemployment benefits fell unexpectedly to 259,000, but the data continued to be influenced by Hurricanes Harvey and Irma, muddying the labor market picture in the near term.

Shares of Calgon Carbon soared 62.2 percent in premarket trading after Japanese chemical manufacturer Kuraray agreed to buy the carbon materials firm for $1.107 billion.

Anadarko Petroleum rose 4.3 percent after the oil producer said it would spend $2.5 billion to buy back its stock.

Advanced Micro Devices was up 1.8 percent after a report that Tesla is working with the chipmaker to develop its own artificial intelligence chip for self-driving cars. Rival chipmaker Nvidia was down 1.8 percent, while Tesla was flat.

(Reporting by Tanya Agrawal; Editing by Arun Koyyur)