Stocks little changed ahead of Fed decision

Investors were encouraged by the Federal Reserve’s latest depiction of an improving economy, but not enough to propel the Dow Jones industrials above 10,000 points.

Stocks closed lower Wednesday after a brief rally, which followed the Fed’s statement, unraveled. The central bank said economic activity had “picked up” since its August meeting but also said it would keep its key short-term interest rate near zero “for an extended period.”

The Fed also said it would spread out its purchases of mortgage-backed securities, part of the extraordinary support the central bank has been giving the economy.

The Dow fell 81.32 points, or 0.8%, to 9,748.55. The Standard & Poor’s 500 fell 10.79 points, or 1%, to 1,060.87, while the Nasdaq composite fell 14.88 points, or 0.7%, to 2,131.42.

Shares of General Mills shot up almost 5%. The food giant posted a 51% jump in quarterly profit, citing solid demand and lower ingredient costs, and boosted its earnings forecast for the year ending in May.

A drop in oil prices weighed on energy and industrial shares. Crude futures tumbled $2.79, or 3.9%, to $68.97 a barrel.

The Treasury market rebounded after the Fed alleviated worries about inflation and interest rates.

Bond yields, which move in the opposite direction of prices, erased gains that followed somewhat disappointing demand for Wednesday’s auction of 5-year notes.

Shares of Los Angeles-based Colony Financial begin trading on the New York Stock Exchange today under the ticker symbol CLNY. The new real estate investment trust’s initial public offering raised $250 million, half the amount first proposed.

The company will be managed by a unit of real estate and private equity giant Colony Capital.