NEW YORK (CNNMoney)
The Dow Jones industrial average, the S&P 500 and the Nasdaq were all lower in early trading, adding to Wednesday's sharp losses.
Investors are still digesting the outcome of the Federal Reserve's policy meeting Wednesday -- the first under the direction of chair Janet Yellen.
The official statement was as expected: The Fed will continue reducing its bond buying in April and the central bank will now base its interest rate policy on inflation data and a broad array of labor market indicators, instead of the unemployment rate alone.
But investors seized on a passing remark Yellen made during a press conference following the meeting. While the Fed plans to keep interest rates near zero for a "considerable period" after its bond buying program ends this fall, Yellen suggested that period could amount to just six months.
"Some clumsy moments at the podium by the new Fed Chair led to a more tumultuous day for the markets than many had expected," said Mike Wallace, an economist at Action Economics. Investors were also caught off guard by new forecasts from hawkish Fed officials about when a potential rate hike could occur, he added.
European markets were moving down in afternoon trading. Asian markets closed with losses.
Related: Fear & Greed Index still in neutral
But while the stock market took a hit, the dollar rallied as a result of Yellen's comments and "the fact that the Federal Reserve sounded more hawkish than expected," according to Marc Chandler, currency strategist for Brown Brothers Harriman.
"The hawkishness tends to be stronger for the dollar," said Chandler, who titled his market report, "Dollar rally as Yellen lays an egg." He said that support for the dollar and the slump in equities both result from the trend toward higher U.S. interest rates.
The Chinese yuan hit a one-year low against the dollar.
Related: CNNMoney's Tech30
Looking ahead, the Federal Reserve is set to release bank stress test results Thursday afternoon.
Earlier, the U.S. government said initial claims for unemployment benefits rose last week.
In corporate news, Burlington Stores (BURL) reported a quarterly jump in same-store sales and adjusted net income year-to-year. Homebuilder Lennar (LEN) issued a strong report and said new orders in the latest quarter rose 10%.
Nike (NKE, Fortune 500) will report after the close.
Shares of Guess (GES) fell after the apparel maker's revenue forecasts fell below analyst expectations.
First Published: March 20, 2014: 9:44 AM ET
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