Stocks Find No Solace in Fed

Updated from 4:12 p.m. EDT

Stocks in the U.S. fell hard Tuesday after the minutes from the last Federal Reserve meeting failed to give investors any firm indication that the central bank is considering lowering interest rates.

The Dow Jones Industrial Average plunged 280.28 points, or 2.1%, to 13,041.85. The S&P 500 lost 34.43 points, or 2.35%, to 1432.36, and the Nasdaq Composite was weaker by 60.61 points, or 2.37%, at 2500.64.

The major averages were underwater early in the session amid more bad news on the financial and housing sectors, but they went deeper into the red after the 2 p.m. EDT release of the minutes of the Aug. 7 Fed meeting.

During that gathering, the Federal Open Market Committee kept its fed funds target rate at 5.25% for the ninth straight time. The Fed said it remained focused on inflation but it altered its statement to note the recent credit crisis.

In the statement accompanying the rate decision, the central bank noted that "credit conditions have become tighter for some households and businesses, and the housing correction is ongoing."

The minutes indicated that members of the FOMC judged that risks were on the rise, saying that "conditions in markets for subprime mortgages and related instruments, including segments of the asset-backed commercial paper market, deteriorated sharply toward the end of the period."

The Fed also said that the worsening mortgage situation could lead to a housing slump deeper and more prolonged than it had seemed earlier this year.