US stocks tumbled on Wednesday after the Federal Reserve said it will hold interest rates at the lowest level since 1958 but indicated it might be closer to a rate hike.
The Dow and Nasdaq stock gauges fell for the second straight session after hitting 2 1/2-year highs on Monday, erasing their gains of the last two weeks.
The Fed opted to hold the federal funds rate for overnight loans between banks at 1 percent, as anticipated, but policy makers altered a pledge made in August to keep rates low for a "considerable period" and said instead they "can be patient" before implementing what would be the first rate increase since May 2000.
"I think people may use this as excuse to take some profits," said Michael Murphy, managing director at Wachovia Securities. "Up until now every time the market's tried to sell off, the buyers would appear and they'd turn the market before there was a meaningful correction."
The Dow Jones industrial average fell 141.55 points, or 1.33 percent, to 10,468.37, its biggest daily percentage loss since late October. The Standard & Poor's 500 Index was down 15.57 points, or 1.36 percent, at 1,128.48. The technology-laced Nasdaq Composite Index dropped 38.67 points, or 1.83 percent, to 2,077.37, notching its biggest daily percentage loss since early December.
Market players, reacting to the Federal Open Market Committee's decision, noted that in the long run higher rates can be a sign the economy is improving.
"Longer term, this policy implies a recovering economy and an improved environment for corporate earnings which should have long-term positive implications for US stock market," said Jason Ader, president of Hayground Cove Asset Management.
Still the major indexes erased their gains from earlier in the session after the Fed's announcement in mid-afternoon.
Volume was heavy with 1.84 billion shares changing hands on the New York Stock Exchange and 2.30 billion traded on the Nasdaq. Decliners outnumbered advancers by more than 2 to 1 on the NYSE and the Nasdaq.
In other economic news, the government issued a weaker-than-expected reading on durable goods orders, which raised questions about the strength of the manufacturing recovery. The Commerce Department said orders were flat in December.
Investors sifted through a flood of corporate earnings.
Shares of Amazon.com Inc fell after analysts said the online retailer's growth strategy could pressure its new-found profitability.
The drop came a day after Amazon posted its biggest quarterly profit ever on a surprise 36 percent jump in revenue. Amazon's stock fell $3.78, or 6.8 percent, to $51.96.
Intel Corp President and Chief Operating Officer Paul Otellini said he was comfortable with the financial guidance for the first quarter that the company gave earlier. The stock fell, however, dropping 25 cents to $31.38.
On the upside, Altria Group Inc rallied after the food and tobacco company reported higher quarterly earnings, helped by improved results at its domestic tobacco unit.
Shares of Altria, whose brands include Marlboro cigarettes and Kraft foods, rose 65 cents, or 1.2 percent, to $55.65 and ranked among the blue chip Dow's top percentage gainers.
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