Updated from 4:13 p.m. EDT

Stocks ended to the downside Tuesday after the

Federal Reserve

took a break from its two-year interest rate-hiking campaign but left the door open for future increases.

The market was erratic in the immediate aftermath of the central bank's latest meeting before turning solidly lower. The

Dow Jones Industrial Average

lost 45.79 points, or 0.41%, to 11,173.59, having been up by as many as 57 points earlier. The

S&P 500

fell 4.29 points, or 0.34%, at 1271.48, and the

Nasdaq Composite

closed down 11.65 points, or 0.56%, to 2060.85.

The

Federal Open Market Committee

decided to keep its federal funds target unchanged at 5.25%, an outcome that had been expected by many on Wall Street. Going back to June 2004, policymakers had lifted rates by a quarter-point at every one of their meetings.

Along with the rate increase, the FOMC said in a statement that recent indicators showed "economic growth has moderated from its quite strong pace earlier this year. The committee also said "inflation pressures seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand."

The FOMC reiterated its views on the possibility of further hikes, saying that the extent and timing of any additional firming "will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."

Art Hogan, chief market analyst with Jefferies, said the statement will keep the market closely watching future economic data. "In particular, the Fed still sees that some inflation risks remain," he said. "Although we don't have a rate hike now, we don't know what's coming for the next Fed meetings."

Robert Pavlik, chief investment officer with Oaktree Asset Management, said the Fed left rates alone not because it has reached a neutral point but because it's concerned about "overshooting and forcing the economy into a recession." Pavlik believes this will "lead to additional selling pressure because market participants will be concerned with the overall slowdown in the U.S. economy."

To view Gregg Greenberg's video take on today's market, click here

.

The financial futures market is now pricing in 24% odds of a rate hike at the next FOMC meeting Sept. 20.

The 10-year Treasury bond was down 2/32 in price and yielding 4.92%. The dollar fell against the euro and the yen following the rate announcement.

Volume picked up after the Fed's announcement. About 1.60 billion shares changed hands on the

New York Stock Exchange

, with decliners beating advancers by a 9-to-7 margin. Volume on the Nasdaq was 1.92 billion shares, and twice as many stocks fell as the number that rose.

On the economic docket, the Labor Department said it's preliminary reading on second-quarter productivity showed an increase of 1.1%, essentially in line with expectations. However, unit labor costs, a key measure of inflation, were up 4.2%, greater than the expected 3.7% rise.

"Cost increases at this pace would be alarming from an inflation perspective if growth were not slowing," said Ian Shepherdson, chief economist with High Frequency Economics. "But it is, so the alarm should sound over corporate earnings forecasts instead."

Oil declined after a sharp rise in prices pressured the indices on Monday after

BP

(BP) - Get Report

said it was stopping production at Prudhoe Bay in Alaska to repair a leak in a pipeline. In Nymex floor trading, September crude eased by 67 cents to close at $76.31 a barrel.

Earnings season is winding down, but corporate deals heated up. The headliner of the day saw a merger between two data-storage outfits, with

Brocade

(BRCD)

agreeing to acquire

McData

(MCDTA)

for $713 million in stock. Brocade's shareholders will own 70% of the combined company's stock. Brocade also guided higher for the fiscal third quarter.

Brocade dropped $1.13, or 18.4%, to $5.01, but McData surged 41 cents, or 14.4%, to close at $3.26.

Separately,

Nokia

(NOK) - Get Report

said it would buy

Loudeye

(LOUD)

for $4.50 a share in cash, or $60 million, in order to give users of its products more options for listening to music. Additionally,

Rent-a-Center

(RCII) - Get Report

disclosed plans to take over rival

Rent-Way

(RWY)

for $10.65 a share, or $281 million in cash.

After the close, networking giant

Cisco's

(CSCO) - Get Report

will report its quarterly earnings. Analysts are looking for a fourth-quarter adjusted profit of 28 cents a share, up from 25 cents a year ago, on $7.9 billion in sales. Cisco ended lower by 12 cents, or 0.7%, to $17.29 ahead of the report.

Cablevision

(CVC)

delayed its second-quarter earnings report, saying it has to review the timing of its past stock option grants. The voluntary review was announced to the

Securities and Exchange Commission

, and Cablevision also said it expects to restate its previous financials. Still, Cablevision added 32 cents, or 1.5%, to $22.40.

Sara Lee

(SLE)

swung to a fiscal fourth-quarter profit of $8 million, or 1 cent a share, compared with a loss of $148 million, or 19 cents, a year ago. On a continuing operations basis, the company had a loss of 15 cents a share. The Thomson First Call average estimate was for 29 cents a share. Sara Lee fell by 37 cents, or 2.2%, to $16.63.

Away from earnings,

Bristol-Myers Squibb

(BMY) - Get Report

said a generic version of its blood thinner Plavix will likely be available shortly from Apotex. Bristol-Myers said it will pursue the enforcement of its patent rights to Plavix, which the company co-markets with

Sanofi-Aventis

(SNY) - Get Report

.

Bristol-Myers lost $1.55, or 6.8%, to $21.22, and Sanofi was down 41 cents, or 0.9%, to finish at $44.45.

Dow component

McDonald's

(MCD) - Get Report

said July same-store sales rose 3.8%, with strong Europe sales offsetting weak U.S. restaurant sales. McDonald's gave back 38 cents, or 1.1%, to $35.15.

Apparel retailer

Urban Outfitters

(URBN) - Get Report

reported a second-quarter same-store sales decline of 7%, citing "missed fashion opportunities." Sales rose 13% to $285.6 million during the quarter, but fell short of the average analyst estimate for sales of $298 million. Shares were off 60 cents, or 4.1%, to end at $14.01.

As for analyst actions, Banc of America cut its price target on PC maker

Dell

(DELL) - Get Report

to $22 from $25. Dell closed lower by 45 cents, or 2%, to $21.59.

Separately, Merrill Lynch upgraded

Prudential

(PRU) - Get Report

to buy from hold, saying it believes the insurance company is oversold following its second-quarter earnings results. Since reporting its results, shares have dropped nearly 8%. Prudential dipped 4 cents, or 0.1%, to $72.02.

Overseas markets were mixed, with London's FTSE 100 down 0.2% at 5818 and Germany's Xetra DAX rising 0.5% to 5652. In Asia, Japan's Nikkei jumped 2.1% overnight to 15,464, and Hong Kong's Hang Seng edged up 0.6% to 17,048.