NEW YORK — A few choice words by the Federal Reserve following its open market committee meeting sent stocks plunging Wednesday as investors speculated that interest rate hikes would happen sooner than expected.

This story first appeared in the January 29, 2004 issue of WWD. Subscribe Today.

After a two-day meeting, the Fed kept its federal funds rate at 1 percent, which stands at a 45-year low.

“The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation,” the Fed said in a statement. “With inflation quite low and resource use slack, the committee believes that it can be patient in removing its policy accommodation.”

This phrasing by the Fed pushed the Dow Jones Industrial Average down 141.55 points, or 1.3 percent, from the prior close to end the day at 10,468.37. During the morning session, the Dow was enjoying modest gains, and at one point was up one quarter of a percent.

After the Fed’s statement, investors pulled back sharply across most sectors. The S&P Retail Index, which was down 0.2 percent in the morning session, closed the day at 371.5, which was down 2.5 percent from the prior close.

The Fed added that “evidence accumulated over the intermeeting period confirms that output is expanding briskly. Although new hiring remains subdued, other indicators suggest an improvement in the labor market. Increases in core consumer prices are muted and expected to remain low.”