SARA LEPRO

NEW YORK (AP) ¿ Investors were encouraged by the Fed's latest improved assessment of the economy, but not enough to propel the Dow Jones industrial average past 10,000.

Stocks closed lower Wednesday as a brief rally followed the Fed's economic statement and then faded. The Dow came within 82 points of crossing 10,000 for the first time since October, but ended the day with a loss of 81.

Stocks often trade erratically on days when the Fed meets to discuss interest rates, as investors pore over the statement accompanying the Fed's interest rate decision for clues about the economy and what the central bank's next steps might be.

Analysts said there were no surprises from the Fed meeting, though some investors worried that the Fed would pull its supports for the economy too soon.

"I think there is a real concern out there that this is just a head-fake and the stimulus out there is temporary," said Thomas Wilson, managing director of the institutional investments and private client group at Brinker Capital in Berwyn, Pa. He pointed to the Fed's slowing of its purchases of mortgage-backed securities. But he also said "the market got exactly what it was expecting."

The central bank's governors said the pace of economic activity has "picked up" since their last meeting in August, and they said they would keep short-term interest rates at historically low levels near zero "for an extended period."

That allayed any lingering concerns that the Fed was considering a rate increase, something it will have to do eventually in order to keep inflation in check. Higher interest rates would protect against prices creeping higher, but it would also mean greater borrowing costs for banks and businesses, a negative for both stocks and bonds.

In its statement, the Fed said it would "continue to employ a wide range of tools" to spur a recovery while also staving off inflation. It said it would again slow some of its purchases of mortgage-backed securities, part of the extraordinary support the central bank has been giving the economy over the past year. The move shows the Fed is increasingly confident about a recovery.

The Fed's decision on rates and gently upgraded view of the economy were in line with what investors anticipated but didn't give the market enough reason to push higher. Jeffrey Kleintop, chief market strategist at Boston-based broker LPL Financial, said a sharp drop in oil prices had a bigger impact on Wednesday's market.

With major market indicators up more than 50 percent from their lows in early March, many market watchers are worried that stocks have become overvalued, especially with the strength of the economy's recovery still in question. Still despite such doubts, investors continue to buy up stocks as they become afraid of missing out on an extended rally.

The Dow fell 81.32, or 0.8 percent, to 9,748.55. The Standard & Poor's 500 fell 10.79, or 1 percent, to 1,060.87, while the Nasdaq composite fell 14.88, or 0.7 percent, to 2,131.42.

Losing stocks outnumbered winners by about 3-to-2 on the New York Stock Exchange, where consolidated volume came to 5.58 billion shares, up from 5.34 billion Tuesday.

Fed Chairman Ben Bernanke had already tipped off the market last week about the Fed's view on the economy when he said that the recession was "likely over" from a technical standpoint, even as trouble spots like unemployment remain.

"If they had come out with anything other than no changes, the market would have reacted negatively," said Tom Nyheim, vice president and portfolio manager at Christiana Bank & Trust Co. "But the policy decision was uniform, unanimous. They are not concerned about inflation."

The drop in oil prices weighed heavily on energy and industrial shares. The price of crude for November delivery tumbled nearly 4 percent, or $2.79, to settle at $68.97 a barrel on the New York Mercantile Exchange. The decline in energy prices accelerated during the day after the government reported that supplies of crude, gasoline and distillate fuel surged above expectations.

In corporate news, a surprisingly strong earnings report helped lift shares of General Mills Inc. The maker of Cheerios and Yoplait yogurt said its profit jumped 51 percent on lower ingredient costs and solid demand for its products. The food maker also increased its full-year outlook. Shares soared $2.83, or 5 percent, to $63.80.

Bond prices rebounded after the Fed alleviated worries about inflation and said it would keep its short-term interest rate near zero. Treasurys recouped their losses from earlier in the day, which came after somewhat disappointing demand for the latest auction of 5-year notes.

The 10-year note rose 6/32 to 101 20/32 and its yield fell to 3.43 percent from 3.45 percent.

The dollar rose against other major currencies. Gold prices fell

In other trading, the Russell 2000 index of smaller companies fell 7.32, or 1.2 percent, to 613.37.

Overseas, European indexes reversed early gains and finished slightly lower. Britain's FTSE 100, Germany's DAX index and France's CAC-40 all fell 0.1 percent.

Hong Kong's Hang Seng index fell 0.5 percent. Japan's markets were closed for a public holiday.
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