U.S. stocks sharply lower in fallout from Fed

U.S. stocks declined Friday, with energy hardest hit as the price of oil dropped for a second day, as investors interpreted the Federal Reserve's decision to hold rates at record lows as a negative take on the economy.

"The Fed is still on hold, which is an overhang for the market," Robert Pavlik, chief market strategist at Boston Private Wealth. "There is some school of thought that they didn't raise rates because the U.S. economy is not strong enough -- [Fed Chair Janet] Yellen insinuated that there were some data that were not quite as robust as some of the prior data."

The S&P 500 (SPX) finished the day down 32 points, or 1.6 percent, at 1,958.

The Dow Jones Industrial Average (DJI) lost 290 points, or 1.7 percent, to 16,385. The Nasdaq Composite (COMP) shed 67 points, or 1.4 percent, to 4,827.

Wall Street signaled its distress a day after the Fed opted not to hike interest rates, voicing concern over slowing growth in China. Still, Yellen said a majority of Fed members continue to expect to increase rates this year, with a December move viewed as more likely than at the next Federal Open Market Committee meeting in October.

"We are surprised that economists were surprised the Fed left interest rates unchanged," wrote Nick Raich, chief executive officer at the Earnings Scout in an email."Based on our collection of decelerating sales trends among U.S. corporations, we believe the Fed made the right decision to wait."

In the coming week, economic reports on home sales and durable goods could shed further light on the domestic economy.