NEW YORK: US stocks slumped on Wednesday after the Federal Reserve offered a cautious outlook on the struggling economic recovery and vowed to maintain its policy of ultra-low interest rates.
The Dow Jones Industrial Average fell 80.34 points (0.66 percent) to close at 12,109.67.
The broader S&P 500 tumbled 8.38 points (0.65 percent) to 1,287.14, while the tech-heavy Nasdaq Composite dropped 18.07 points (0.67 percent) to 2,669.19.
In a highly watched announcement, the Fed's interest rate-setting body, the Federal Open Market Committee, said it would keep the federal funds rate at near-zero levels "for an extended period" to boost the flagging recovery.
The Fed also slashed about a half point off its estimate of gross domestic product growth for 2011, to a range between 2.7 percent and 2.9 percent.
Markets were waiting to see what kind of new stimulus policies the Fed might pursue after the end of June, when it plans to concludes its $600-billion second round of quantitative easing, dubbed QE2.
"The Fed didn’t say anything new. (It) certainly didn't offer QE3," said Peter Cardillo of Avalon Partners.
"It was a neutral event for the stock market and the reason why we are seeing stocks off a little bit is because the dollar is strengthening," he added.
A stronger dollar is bad for US exporters because it makes their goods more expensive abroad.
Boeing shares dropped 2.5 percent as its European archrival Airbus enjoyed a flood of deals at the Paris International Airshow, including a $15 billion order for 150 of Airbus's new A320neo models from Indian airline IndiGo.
Bond prices held steady or made slight gains. The yield on the 10-year US Treasury note rose to 2.99 percent from 2.98 percent on Tuesday, while that on the 30-year bond was roughly unchanged at about 4.22 percent.
Bond prices and yields move in opposite directions.
Copyright AFP (Agence France-Presse), 2011
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