A surge in crude oil prices, which briefly topped $70 a barrel, had a mixed impact on the energy sector, with shares of oil producers rising, while providers of oil service fell sharply.
The Dow Jones Industrial Average finished down 5 points at 13,422, as 15 of its 30 components advanced. Gainers included Alcoa Inc. and AT&T Inc. , while Disney and Hewlett Packard fell.
Leading the gains among blue chips, General Motors Corp. rose 2% after news that it would sell its Allison Transmission business for $5.6 billion to Carlyle Group and Onex Corp. And Intel Corp. rose 0.6% after Lehman Brothers upgraded the stock, predicting that its second-quarter sales will reach the top end of forecasts.
Investors were first heartened that central bankers didn't upgrade existing concerns about inflation, while dropping a previous reference that described core inflation as "somewhat elevated."
"Any type of no-comment on inflation is going to be viewed as a positive," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank.
But the Fed's statement also left the market uncertain, as the central bank more or less kept its monetary policy outlook unchanged.
"The market was geared towards expecting that kind of benign statement from the Fed," Fitzpatrick said.
The S&P 500 dropped 0.6 points to 1,505, while the Nasdaq Composite advanced 3.0 points to 2,608. Intel was amongst the most heavily traded stocks on Nasdaq, along with Oracle Corp. , whose earnings on Tuesday were seen as upbeat.
Trading volumes showed 1.5 billion shares exchanging hands on the New York Stock Exchange and 1.9 billion trading on the Nasdaq stock exchange. Advancing issues topped decliners by 18 to 13 on the NYSE, and by 15 to 14 on Nasdaq.
By sector, oil , gold , telecoms and airlines led the gains, while broker/dealers , oil services and semiconductors fell.
Airlines advanced even as crude oil rallied after JP Morgan upgraded six airline stocks, including UAL Corp. , Alaska Air , American Airlines and Continental Airlines .
Commodities were trending higher, with crude oil continuing to rally after data on Wednesday showed a decline in gasoline inventories. The August crude futures contract rose as high as $70.50 a barrel, before settling at $69.57, for a gain of 60 cents.
Gold also rose, gaining $5.60 to close at $650.40 an ounce.
Stocks rallied Wednesday, reversing early weakness, as investors set aside recent jitters about the subprime mortgage market and hedge fund woes to focus on rebuilding their portfolios ahead of the end of the second quarter on Friday.
Earlier, the final revision to first-quarter gross domestic product showed a slight upward revision in growth that still fell short of economists expectations. A key gauge of inflation in the GDP report was also revised higher.
First-quarter growth in gross domestic product was revised to 0.7% from 0.6% previously, but the pace was still the slowest in four years. Meanwhile, core consumer prices, which are closely monitored by the Fed, rose at a 2.4% annualized pace in the quarter, revised up from the 2.2% rate previously projected.
Bonds came under pressure from the GDP revision and after the Fed decision. The bond market read the Fed statement as indicating central bankers remain concerned about inflation, which eats in the value of fixed-income assets, such as bonds.
The 10-year Treasury note fell 9/32 to close at 95-7/32 with a yield of 5.121%.
The dollar, meanwhile, was down against the yen and up against the euro.
Stocks in motion
Monsanto Co. reported a sharp increase in third-quarter earning to $570 million or $1.03 a share from $334 million, or 60 cents a share, citing a strong agricultural season. On an adjusted basis, earnings beat expectations. The stock rose 1% to $66.62 before the opening.
Bed Bath & Beyond late Wednesday lowered its earnings and sales forecast and said the overall retail environment is "challenging."
Novellus Systems Inc. said it expects second-quarter revenue and earnings at the low end of the guidance it has previously provided, as it anticipates weakening demand in the semiconductor equipment industry. It's cutting executive salaries for the rest of the year and planning shutdowns.
Credit card giant Capital One Financial Corp. will cut about 2,000 jobs as part of its efforts to reduce expenses by $700 million in the next two years.
By Nick Godt