Still, the fact that the Fed assured the market that it will keep its bond-buying program in place indefinitely likely assured investors and minimized the selling.
And while the GDP contraction is a "shock," it is also likely an exaggeration of the economy's weakness, said Marc Chandler of Brown Brothers Harriman. Wednesday's GDP report is the Commerce Department's first estimate for the fourth quarter and it will be revised twice over the next two months.
Stocks remain near all-time highs. The Dow is less than 2% away from its record high of 14,198.10 reached in October 2007, while the S&P 500 is less than 5% away from its record high of 1,576.09, also reached in October 2007.
Meanwhile, prices on U.S. Treasuries increased slightly after the Fed statement, with the 10-year yield moving back to 2%. The yield topped 2% on Monday for the first time since last April.
On the corporate front, Research in Motion(RIMM) shares tumbled as the company announced the long-awaited BlackBerry 10. RIM is hopeful that its new operating system and devices will change its fortunes in the smartphone market. The company also announced that it is changing its name to BlackBerry, reflecting its big bet on new operating system.
Boeing(BA), which has been dogged over the past few weeks by problems with its now-grounded 787 Dreamliner fleet, topped fourth-quarter earnings forecasts. The aircraft maker says it does not expect a significant financial impact from the grounding of the 787s.
Oil producer Phillips 66(PSX) shares rose after the company's beat earnings expectations. Shares of Amazon(AMZN) gained 5% after the company delivered a 22% jump in fourth-quarter sales late Tuesday.
Shares of Facebook(FB) dropped about 4% in after hours trading. The social media company beat analysts' estimates for its quarterly earnings and revenues, but investors were dismayed by its slowing growth.
Qualcomm's(QCOM) shares surged in after hours trading. The company beat forecasts and raised its 2013 outlook.
Shares of Chesapeake Energy(CHK) closed up 6% after the natural-gas producer announced late Tuesday that embattled CEO Aubrey McClendon will retire in April.
Meanwhile, payroll processor ADP said private employers added 192,000 jobs in January, higher than the 175,000 jobs that analysts were expecting. The ADP report is the first of three this week to provide a snapshot of nation's job market.
The dollar declined versus the euro and the pound, but gained ground versus the Japanese yen.
Oil prices edged higher, while gold prices dipped.
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