Stocks close up slightly after Fed decision, Boeing downgrade

NEW YORK — Wall Street ended an erratic day with a modest gain today after the Federal Reserve left interest rates unchanged and issued a mixed assessment of the economy.

The Dow Jones industrial average closed up 4.40 at 11,811.83 after initially rising more than 100 points after the Fed announcement. Trading is often erratic after a rate decision as the market parses the central bank's statement.

A sharp drop in Boeing also dragged down the Dow. Shares of the aircraft manufacturer dropped to their lowest level in more than two years, and finished down $5.15, or 6.9 percent, at $69.64.

Microsoft, also one of the 30 Dow stocks, gained 62 cents to close at $28.35.

Broader stock indicators were higher. The Standard & Poor's 500 index rose 7.68 to 1,321.97, and the Nasdaq composite index rose 32.98 to 2,401.26.

The Fed pointed to a few positive signs in the economy, including "some firming in household spending." But it also said persistently rising energy prices are likely to limit growth — and not just quicken inflation, which also remains a major concern for the central bank.

The central bank said after a two-day meeting that it is keeping its target for the benchmark federal funds rate at 2 percent. The hold was expected, after several speeches by Fed officials suggesting that inflation is becoming a bigger worry for policymakers. It was the first time in 10 months that the central bank did not cut rates — last summer, the key rate was above 5 percent.

The Fed is at a critical turning point, said Quincy Krosby, chief investment strategist for The Hartford. There are still big credit troubles at the nation's major banks, the job market has been deteriorating for several months, and home prices are still tumbling; to raise rates prematurely could cause these trends to worsen further.

"The goal of the central banks is to get us through this as smoothly as possible, but this is not a science; it is an art form," Krosby said. "This is as delicate as it gets."

Barring another sharp rise in unemployment or a dramatic drop in gross domestic product, the Fed seems to be leaning toward raising rates again, Krosby said. "Nonetheless, they've left the window open for a cut if need be."

Government bond prices pared their losses after the rate decision. The yield on the 10-year Treasury note, which moves opposite its price, was at 4.11 percent, up from 4.10 percent late Tuesday.