Banks hammered as Fed keeps rates at zero

New York - The Dow and S&P 500 fell Thursday while the Nasdaq advanced slightly in a choppy session after the Federal Reserve kept interest rates at zero.

The Dow Jones Industrial Average shed 65.21 points to 16 674.74.

The broad-based S&P 500 fell 5.11 points to 1 990.20, while the tech-rich Nasdaq Composite Index added 4.71 points at 4 893.95.

Markets lurched in both directions at times after the Fed's 20:00 policy announcement, with the S&P 500 jumping above 2 020 at one point before retreating again.

The Fed, following a two-day policy meeting, left its federal funds rate unchanged at zero - 0.25%, opting against the first increase in nine years. While the Fed expressed confidence in the US recovery, it cited concern about overseas conditions.

Large banks fell, with Dow member JPMorgan Chase losing 2.3%, Bank of America dropping 2.9% and Wells Fargo dropping 2.8%. Bank profits were expected to get a lift from a hike in interest rates.

Homebuilder stocks advanced, including Lennar (+1.3%), KB Home (+2.2%) and DR Horton (+1.8%).

General Motors rose 0.4% as US prosectors announced a criminal fine of $900m over the automaker's failure to disclose a deadly ignition defect to regulators. The government agreed not to seek a conviction in exchange for the fine and the appointment of an independent monitor at the company.

Cablevision Systems bolted 13.9% higher on news it would be acquired by Luxembourg-based media giant Altice for $17.7bn.

Drugmaker Eli Lilly jumped 6.6% after releasing research showing its Jardiance medicine for diabetes reduced the risk of cardiovascular-related death.

Amazon rose 2.2% as it unveiled a $50 tablet computer and other devices aimed at budget-conscious, gadget-hungry consumers.

Technology giant Oracle fell 4.0% after reporting that first-quarter earnings dropped 19.7% to $1.75bn. Oracle cited the strong dollar as a drag on results.

Drugstore chain Rite Aid sank 10.8% after second-quarter net income came in at two cents per share, two cents below analyst forecasts.

Bond prices jumped. The yield on the 10-year US Treasury fell to 2.20% from 2.30% on Wednesday, while the 30-year dropped to 3.01% from 3.08%. Bond prices and yields move inversely.