* Investors fret about stimulus removal
* Late sell-off hits banks, housing stocks
* Dow off 0.8 pct; S&P 500 off 1 pct; Nasdaq off 0.7 pct
* For up-to-the-minute market news, click []
(Updates with volume figures)
By Ellis Mnyandu
NEW YORK, Sept 23 (Reuters) - U.S. stocks fell on Wednesday
as investors worried the Federal Reserve is closer to pulling
back on extraordinary measures to inject funding to shore up
the economy.
The Fed's policy-setters met and kept interest rates
unchanged, as expected, but they also said the U.S. central
bank would slow purchases of mortgage debt to extend that
program's life until the end of March. That was seen as a step
toward a measured withdrawal of its extraordinary support for
the economy during the downturn. For details, see
[]
"They're talking about removing some of the various
packages they have in place for purchasing mortgages and other
instruments in debt markets that was kind of keeping everything
flowing," said Kurt Brunner, portfolio manager at the
Swarthmore Group in Philadelphia.
"There's a broad concern about what happens when the Fed
gets out of the way."
Among the casualties were banks, housing stocks and energy
shares. The Dow Jones home construction index <.DJUSHB> slid
3.4 percent, while the S&P energy index <.GSPE> declined 2
percent, a decline that coincided with a sharp slide in crude
oil prices.
The Dow Jones industrial average <> shed 81.32 points,
or 0.83 percent, to 9,748.55. The Standard & Poor's 500 Index
<.SPX> declined 10.79 points, or 1.01 percent, to 1,060.87. The
Nasdaq Composite Index <> lost 14.88 points, or 0.69
percent, to 2,131.42.
Initially stocks had risen sharply following the Fed's
comment that economic activity was picking up, but in the last
hour of trading the market reversed course as investors fretted
about the timing of the removal of some of the Fed's stimulus.
The other worry was the Fed's vow that interest rates will
stay low for an extended time.
"Keeping interest rates low -- it's positive for the
consumer, but it's tougher for banks to make money with
interest rates so low," said Dan Faretta, senior market
strategist at Lind-Waldock, a brokerage firm in Chicago.
The market's runup of nearly 60 percent over six months
might have also caused some investors to use the Fed's
statement as reason to book profits, he added.
Slowing mortgage purchases is something the Fed could
consider in another six months, Faretta said. "There's still a
lot of problems with mortgages, the housing market in general,
as well as the banking sector."
Among banks, JPMorgan <JPM.N> fell 3.03 percent to $45.06,
making the stock the Dow's top drag. The S&P financial index
<.GSPF> and the KBW bank index <.BKX> each lost 2.1 percent.
Home builder Toll Brothers <TOL.N> fell 3.4 percent to
$20.68. In energy, Chevron Corp <CVX.N> fell 1.7 percent to
$71.73, while U.S. front-month crude futures <CLc1> declined
$2.79 or 3.89 percent to settle at $68.97 a barrel.
Networking equipment maker Cisco Systems <CSCO.O> weighed
heavily on Nasdaq, falling 2.6 percent to $22.80.
Volume was moderate, with about 1.32 billion shares
changing hands on the New York Stock Exchange, compared with
last year's estimated daily average of 1.49 billion. On the
Nasdaq, about 2.72 billion shares traded, above last year's
daily average of 2.28 billion.
Declining stocks outnumbered advancing ones on the NYSE by
a ratio of about 9 to 5, while on the Nasdaq, about eight
stocks fell for every five that rose.
(Additional reporting by Leah Schnurr; Editing by Kenneth
Barry)
