Stocks End Mixed After Fed Holds Steady

A less-than-stellar economic prognosis from the Federal Reserve left Wall Street nonplussed Tuesday.

Stocks gave up early gains and finished mixed Wednesday after the Federal Reserve held the federal funds rate steady and cited slow but palpable improvements in the economy. The Dow Jones Industrial Average dropped 23 points to 8300. The Nasdaq picked up 27 at 1792, and the S&P 500 climbed 6 to 901.

The Fed surprised few traders when it left the benchmark interest rate at 0.00% to 0.25%. The move was widely expected, as recent economic data have signaled neither a recovery nor heavy price pressures. Still, the Fed was optimistic about the future.

"Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing," the Fed wrote in its statement. "Conditions in financial markets have generally improved in recent months."

The Fed said the housing recovery remains unstable and that rising unemployment is still a concern. The Fed added that it expects inflation "will remain subdued for some time."

The latest housing data supported the Fed's statement. The annual rate of new home sales dipped slightly in May to 342,000, according to a federal report released Wednesday. Economists had been expecting an increase.

In other economic news, demand looks a bit stronger after new data from the Commerce Department showed durable goods orders rose in May. Economists had projected a decline.

Tech stocks were the market's bright spot, as traders cheered fourth-quarter results from Oracle (ORCL). The software firm topped analysts' estimates and reported record margins.

In finance, Citigroup (C) said it would lift base pay for some of its employees by as much as 50%, CNBC reported. The change is designed not to increase overall compensation but to shift the model away from bonuses, which critics say promote risky behavior.

On the Nymex, oil prices were lower after the Energy Department said crude inventories dipped slightly last week. By 5:05 p.m., crude traded at $68.45 a barrel.

World markets were broadly higher. In Asia, Japan's Nikkei picked up 0.4%, and Hong Kong's Hang Seng rose 2.0%. In Europe, the U.K.'s FTSE picked up 1.2%.