NEW YORK (CNNMoney.com) -- Stocks slipped Tuesday after the Federal Reserve opted not to raise interest rates for the first time in two years, as expected, but left the door open for further rate hikes in the months ahead.

The tech-fueled Nasdaq composite (down 11.65 to 2,060.85, Charts) lost about 0.6 percent. Both the Dow Jones industrial average (down 45.79 to 11,173.59, Charts) and the broader Standard & Poor's 500 (down 4.29 to 1,271.48, Charts) index saw smaller declines.

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Stocks had rallied right after the 2:15 p.m. ET release of the decision and statement, but soon turned lower as investors digested the implications of the decision and the central bank's statement.

The Fed voted to keep a key short-term bank lending rate unchanged at 5.25 percent, reflecting the economic slowdown. The central bank had raised rates 17 straight times starting in June 2004.

The move was not a surprise to investors, following the sharp slowdown in economic growth in the second quarter and a fourth straight month of weak job growth in July.

But some investors may have been disappointed that the central bank basically said it was pausing, rather than ending the hikes. (More on the Fed).

In its statement, the Fed acknowledged the elevation in core inflation, but said pressures could moderate in the months ahead, leaving open the possibility of more hikes in the fall, said Stuart Hoffman, chief economist at PNC Financial Services Group.

"They basically said, 'we took this month off, but that doesn't mean we're done, we'll see what the data show, there are lags in policy moves taking effect'," Hoffman said.

However, investors probably wouldn't have reacted well even if the central bankers had stated that rate hikes were done, as it might have raised worries that they were behind the curve on inflation, said Wan-Chong Kung, senior fixed-income portfolio manager at First American Funds.

"Given the way inflation continues to head higher and given that some of the pressure on inflation comes from labor costs, I think it would have been hard for them to issue a statement that they are done," she added.

After the close, Cisco Systems (Charts) reported quarterly earnings and revenue that rose from a year ago and topped estimates, sending shares 9.7 percent higher in extended-hours trading.

A variety of companies are expected to report quarterly earnings Wednesday morning, including Dow component Walt Disney (Charts), Federated (Charts) and Viacom (Charts).

Wednesday also brings the weekly oil inventories report and the June read on wholesale inventories.

Economically sensitive stocks were hit the hardest, including home builders, realtors, banks and commodities.

Dow 30 losers included Alcoa (down $0.35 to $29.05, Charts), Caterpillar (down $1.58 to $71.60, Charts), Boeing (down $1.60 to $78.15, Charts), United Technologies (down $1.21 to $61.88, Charts), Home Depot (down $0.36 to $34.33, Charts) and Wal-Mart Stores (down $0.36 to $44.46, Charts).

The home building sector slumped across the board, with the Dow Jones Home Construction (Charts) index losing 3.6 percent.

The day also brought its share of merger news.

Brocade Communications, a computer data storage maker, said it would buy rival McData for $713 million in stock, a nearly 50 percent premium on the company's Monday closing price.

Brocade also issued an earnings forecast above estimates, while McData issued a forecast short of Wall Street's expectations.

Brocade (down $1.13 to $5.01, Charts) shares tumbled more than 18 percent while McData (up $0.18 to $3.29, Charts) jumped nearly 6 percent. The stocks both actively-traded on the Nasdaq.

Food service company Aramark accepted a $6.3 billion buyout offer from a group led by its chairman and several investment funds. The offer was upwardly revised from an initial bid in May, but was perhaps short of what investors were hoping, and Aramark (down $0.47 to $32.58, Charts) stock lost about 1.4 percent.

Texas Pacific Group Ventures, a private equity group, is buying aluminum products maker Aleris International for $1.7 billion in cash plus the assumption of debt. Aleris (up $11.46 to $52.85, Charts) shares soared almost 28 percent.

And cell phone maker Nokia is buying digital music distributor Loudeye for $60 million in cash. Nokia (down $0.10 to $19.46, Charts) shares inched lower, while Loudeye (up $2.56 to $4.33, Charts) shares soared almost 145 percent.

Among other movers, shares of Priceline.com (up $4.44 to $30.85, Charts) jumped almost 17 percent after the online travel retailer reported quarterly earnings that rose from a year ago and beat estimates. The company attributed its strength to improved bookings and lifted its full year bookings and earnings forecast.

Leading generic drugmaker Teva Pharmaceuticals (up $1.77 to $35.73, Charts) rose more than 5 percent in active Nasdaq trade after the company reported improved second-quarter earnings that topped estimates and lifted its forecast for full-year earnings.

On the downside, Bristol-Myers Squibb said it expects drugmaker Apotex will release generic versions of its blockbuster anti-clotting medicine Plavix shortly, as has been speculated.

Bristol (down $1.56 to $21.21, Charts) shares slumped nearly 7 percent on the news and topped the New York Stock Exchange's most-actives list.

Market breadth was negative. On the New York Stock Exchange, losers beat winners nine to seven on volume of 1.61 billion shares. On the Nasdaq, decliners beat advancers two to one on volume of 1.93 billion shares.

Investors also eyed the preliminary read on second-quarter productivity. Productivity grew at a 1.1 percent rate after growing an upwardly revised 4.3 percent in the first quarter. Expectations were for a growth rate of 0.9 percent, according to economists surveyed by Briefing.com.

But the report's inflation component - unit labor costs - rose at a 4.2 percent annual rate, suggesting pricing pressures continue to surge, even as the economy slows.

Treasury prices didn't move much on the news, with the yield on the benchmark 10-year note at 4.92 percent, little changed from late Monday.

In currency trading, the dollar was modestly lower versus the euro and the yen.

U.S. light crude oil for September delivery fell 67 cents to settle at $76.31 a barrel on the New York Mercantile Exchange, after fluctuating throughout the morning.

Oil prices surged 3 percent Monday after BP began shutting down the biggest oilfield in the United States due to a corroded pipeline. That sent stocks lower as investors worried about rising inflation, particularly with the Fed seen as near the end of its rate-hiking campaign.

COMEX gold for December delivery fell $2.20 to settle at $657.30 an ounce.

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