Stocks slump on Fed worry over economy

Stocks mostly recovered from an afternoon slump to end with slight losses.

In minutes from their latest meeting released Wednesday, Federal Reserve officials said they saw a variety of threats to the U.S. economy, including a slowdown in China and a looming budget crunch in Washington. But the Fed did not signal that new steps to stimulate the economy were on the way.

Investors initially took the news badly; the Dow Jones industrial average dropped as many as 118 points shortly after the 2 p.m. release of the Fed's minutes. A recovery in the last hour saw it down just 48 points.

Fed officials said the economy could struggle if Congress fails to avert tax hikes and across-the-board spending cuts scheduled for the end of the year. They also worried that Europe's debt crisis and China's slower growth would weigh on the United States.

But it was what the Fed didn't say that tripped the stock market up. Traders had hoped to see evidence that the Fed was prepared to pull the trigger on a new bond-buying effort to prod the economy forward.

The Dow closed at 12,604.53, down 48.59 points. The Standard & Poor's 500 index was nearly unchanged at 1,341.45. The Nasdaq composite index lost 0.49 percent to close at 2,887.98.