Wall Street lost steam on Wednesday after the Federal Reserve revised down its outlook for U.S. economic growth by 0.4 percentage points for this year.
The Dow Jones industrial average declined 80.34 points, or 0.66 percent, to 12,109.67. The Standard & Poor’s 500 fell 8.38 points, or 0.65 percent, to 1,287.14. The technology-heavy Nasdaq Composite Index dropped 18.07 points, or 0.67 percent, to 2,669.19.
In a statement, the Fed predicted that the U.S. economy should grow 2.7 percent to 2.9 percent, instead of 3.1 to 3.3 percent as previously estimated.
It also revised down its prediction for the 2012 economic growth to a range of 3.3 percent to 3.7 percent.
Meanwhile, the U.S. central bank maintained its official interest rates at near zero. Fed Chairman Ben Bernanke hinted in his news conference after a two-day Fed policy meeting that the Fed would remain the rate through the end of the year or longer.
The Fed also confirmed it was ending its 600-billion-dollar bond purchasing program at the end of June and reiterated it will continue to reinvest principal payments from its holdings.
According to Ben Willis, director of floor operations at Sunrise Securities Ltd., the Fed forecast was almost the same as investors’ estimation and that was why Wednesday’s market did not suffer a great decline.
However, he said investors concerned more about the labor market. The Fed on Wednesday downgraded its outlook of the U.S. labor market. It said the unemployment rate would remain at the high level of 8.6 percent to 8.9 percent in the fourth quarter of 2011.