U.S. stocks plunge as energy-driven inflation worries investors

U.S. stocks saw deep losses on Wednesday, as investors digested the Federal Reserve's latest policy decision and hotter-than-expected inflation data.

The Dow Jones Industrial Average fell 1.63 percent to 46,225.15, dropping to a new low for the year. The S and P 500 sank 1.36 percent to 6,624.7. The Nasdaq Composite Index shed 1.46 percent to 22,152.42.

All 11 primary S and P 500 sectors ended in the red. The consumer staples and consumer discretionary sectors led the laggards, losing 2.44 percent and 2.32 percent, respectively. The energy sector posted the narrowest decline, edging down by 0.16 percent.

The market sell-off followed the Fed's decision to maintain its benchmark interest rate in a target range of 3.5 percent to 3.75 percent.

"The implications of developments in the Middle East for the U.S. economy are uncertain," the Federal Open Market Committee said in a statement. "The Committee is attentive to the risks to both sides of its dual mandate." Despite the cautious tone, the Fed signaled that it still anticipates one interest rate cut this year.

Adding to the headwinds, the U.S. Bureau of Labor Statistics reported Wednesday that the producer price index, a measure of wholesale pipeline costs, increased by a seasonally adjusted 0.7 percent in February. The core index, which excludes volatile food and energy costs, rose 0.5 percent month on month.

The gloomy economic outlook weighed heavily on most sectors, with all of the "Magnificent Seven" tech giants closing lower, led by a 2.48-percent drop in Amazon.

The U.S. dollar strengthened in late trading on Wednesday.

The dollar index, which measures the greenback against six major peers, went up 0.52 percent to 100.092 at 15:00 (1900 GMT).

In late New York trading, the euro declined to 1.1516 dollars from 1.1542 dollars in the previous session, and the British pound fell to 1.3341 dollars from 1.3360 dollars in the previous session.

The U.S. dollar bought 159.41 Japanese yen, higher than 159.00 Japanese yen in the previous session. The U.S. dollar rose to 0.7902 Swiss francs from 0.7847 Swiss francs, and it advanced to 1.3701 Canadian dollars from 1.3697 Canadian dollars. The U.S. dollar climbed to 9.3346 Swedish kronor from 9.2737 Swedish kronor.