Bleak Fed outlook unnerves markets

New York - US stocks slumped on Wednesday after the Federal Reserve offered a bleak outlook on the stuggling economic recovery and vowed to maintain its policy of ultra-low interest rates.

The Dow Jones Industrial Average fell 78.60 points (0.64%) to 12 111.41 in closing trade.

The broader S&P 500 tumbled 8.14 points (0.63%) to 1 287.38, while the tech-heavy Nasdaq Composite dropped 18.07 points (0.67%) to 2 669.19.

In a highly-watched announcement, the Fed's interest rate-setting body, the Federal Open Market Committee, said it would keep the federal funds rate at near-zero levels "for an extended period" to boost the flagging recovery.

The Fed also slashed about a half point off its estimate of gross domestic product growth for 2011, to a range between 2.7% and 2.9%.