Fed Minutes Clock Stocks

Shares fall on word policymakers are still weighing rate hikes.
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Updated from 4:08 p.m. EDT

Wall Street was lower for the entire session and ended to the downside Wednesday after the

Federal Reserve

indicated that policymakers are still weighing interest rate hikes.

The

Dow Jones Industrial Average

lost 89.23 points, or 0.71%, at 12,484.62, and the

S&P 500

was off 9.52 points, or 0.66%, at 1438.87. The

Nasdaq

declined 18.30 points, or 0.74%, to 2459.31.

About 2.74 billion shares changed hands on the

New York Stock Exchange

, and volume on the Nasdaq reached 1.96 billion shares. Losers outpaced winners 2 to 1.

"Certainly, the concern about slower growth and higher inflation hurt us today," said Jay Suskind, head of institutional equity trading with Ryan Beck & Co. "The Fed minutes reinforced the feeling, and there's even more trepidation in front of more earnings reports."

Markets retreated following the 2 p.m. EDT release of the Federal Open Market Committee minutes from its two-day March meeting. At that gathering, policymakers left the fed funds target rate -- the rate banks use to charge each other interest for overnight loans - unchanged at 5.25% for the sixth consecutive meeting.

In the statement accompanying the rate decision, the Fed said the committee's predominant policy concern remains the risk that inflation will fail to moderate as expected.

However, the FOMC offered a more neutral statement on its future rate moves, saying it will watch incoming data for "policy adjustments," as opposed to its prior language of policy "firming." That sent markets surging at the time in hopes that the monetary body may cut interest rates.

The minutes indicated that members of the FOMC judged that "the combination of generally weaker-than-expected economic indicators and uncomfortably high readings on inflation suggested increased downside risks to economic growth and greater uncertainty that the expected gradual decline in core inflation would materialize."

But the members also noted that "further policy firming might prove necessary to foster lower inflation, but in light of the increased uncertainty about the outlook for both growth and inflation, the committee also agreed that the statement should no longer cite only the possibility of further firming."

To view Brittany Umar's video take on today's market, click here

.

"

Fed Chairman Ben Bernanke has been consistently saying he wouldn't want to do anything to rates, to the upside or the downside," said Doug Roberts, founder and chief investment strategist with Channel Capital Research. "He wants to stay the course and keep things on hold. The market seems to have gotten ahead of itself in expecting that the Fed would cut rates."

Earlier Wednesday, Bernanke spoke at a forum in New York, where he downplayed the need for heightened regulation of the hedge fund industry.

Treasury prices dipped, with the 10-year note down 1/32 to yield 4.72% and the 30-year bond off 2/32, yielding 4.91%.

Stocks had been trading lower during the earlier part of the session after the Energy Department said gasoline stores sank by 5.5 million barrels last week, a much steeper drop than had been expected. Crude stocks were up by 700,000 barrels.

Following the report, May oil futures rose 12 cents to $62.01 a barrel. Gasoline jumped 3.5 cents to $2.16 a gallon, touching an eight-month high of $2.17 a gallon earlier.

Other commodities finished mixed. Gold climbed 20 cents to $681.70 an ounce, while natural gas was down 1.5 cents at $7.85 per million British thermal units.

"We went as far as we could go, from a technical point of view," said Paul Mendelsohn, chief investment strategist with Windham Financial. "A lot of people decided this was a good point to sell into the rally we've had. There are a lot of negative fundamentals that have been overlooked, such as the weakness in the dollar and stronger oil prices."

Also pressuring the averages was a report from the International Monetary Fund predicting that the U.S. economy is poised to advance only 2.2% this year, a slower rate than at any point in the past five years.

Thus far this week, stocks in New York haven't been able to muster any momentum. On Tuesday, the Dow tacked on 4.71 points at 12,573.85, and the S&P 500 was better by 3.78 points at 1448.39. The Nasdaq was the best performer, up 8.43 points, or 0.34%, to 2477.61.

The market's latest drop came despite a solid first-quarter report from

Alcoa

(AA) - Get Report

before the previous session's close. Alcoa's stock added 18 cents, or 0.5%, to close at $35.08.

"This is a good start to the

quarterly earnings season," said Marc Pado, U.S. market strategist with Cantor Fitzgerald, who noted that Alcoa's earnings were somewhat sector-specific. "The first week is always a bit slow. Investors seem very content to wait for earnings to establish a clear trend."

In other corporate news,

Citigroup

(C) - Get Report

confirmed earlier reports that it was planning massive job cuts, saying before the opening bell that 17,000 employees would be let go. The financial-services giant will take a pretax charge of nearly $1.4 billion. Shares of Citigroup shed 60 cents, or 1.2%, to $51.80.

Among analyst ratings changes, Wachovia upgraded apparel retailer

Gap

(GPS) - Get Report

to outperform from market perform, and Maxim Group raised

Renovis

(RNVS)

all the way to buy from sell. Gap gained 28 cents, or 1.5%, to $18.62. Renovis finished higher by 18 cents, or 4.4%, to $4.30.

Elsewhere, JMP Securities downgraded both

CheckFree

(CKFR)

and

Dendreon

(DNDN)

to market perform from strong buy. CheckFree slumped 7.3% to $35.35, and Dendreon fell 17.7% to $18.23.

Global stock markets were mixed. Tokyo's Nikkei advanced 0.03% overnight to 17,670, and Hong Kong's Hang Seng rose 0.5% to 20,449. London's FTSE, Frankfurt's Xetra DAX and the Paris Cac 40 finished in negative territory by 0.1% or more.