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Thursday, 31 January 2013

DOW 13,910.42 Down 44.00(0.32%)

Major U.S. stock benchmarks fell on Wednesday, after dour U.S. growth data reinforced a decision by the Federal Reserve to maintain its commitment to massive economic stimulus.

In a decision widely expected by analysts, the Fed emphasized that it would stick to its bond buying program. That outcome was cast into doubt just weeks ago, after minutes from the central bank's last policy meeting showed some Fed members were growing concerned about ultra-low borrowing costs.

The decision converged with data that showed the U.S. economy shrank by an annualized 0.1 percent in the final three months of 2012, and reinforced expectations that the Fed would likely err on the side of more stimulus.

Despite a run of strong corporate earnings, the GDP data fanned concerns about the economy's ability to absorb higher tax rates — some of which took effect when the payroll tax holiday expired at the beginning of the year — and efforts to cut government spending.

"The real risk out there, and the Fed was very vague in how they characterized it…I think we're going to see major government spending cuts that are going to come through sequestration," Diane Swonk, chief economist and senior managing director, Mesirow Financial, told CNBC's "Street Signs"

"That is something the Fed has to deal with. That not only means weaker growth, which justifies lower rates, but it also means more Fed action."

After floating for most of the session between modest gains and losses in directionless trading, the Dow Jones Industrial Average shed about 44 points, trading around 13,910.42, drifting further away from the psychologically-important 14,000 barrier being watched by analysts.

The S&P 500 Index slipped by nearly six points to 1,501.96, while the the Nasdaq dipped 11 points to trade above 3,142.31.

The CBOE Volatility Index (VIX), widely considered to be the market's best gauge of fear in the market, rose above just shy of 14.

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