U.S. stocks and the dollar fell as investors assessed the Federal Reserve’s views on the economy. Treasuries rallied.

The S&P 500 ended the session lower after getting whipsawed as Chairman Jerome Powell suggested the pandemic could inflict permanent damage on the American economy even as the Fed signalled it’d keep rates near zero possibly for years to come. The Treasury curve steepened sharply after the central bank said it will at least maintain the current rate of bond purchases.

Unofficially, the Dow Jones Industrial Average fell 282.86 points, or 1.04 per cent, to 26,989.44, the S&P 500 lost 17.12 points, or 0.53 per cent, to 3,190.06 and the Nasdaq Composite added 66.59 points, or 0.67 per cent, to 10,020.35.

“It seems like profit-taking is underway after the Fed didn’t deliver any new measures,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. “It’s not as easy to take risk at this point.”

U.S. equities have rallied more than 40 per cent from their March lows as central-bank asset purchases and unprecedented stimulus sparked demand for risk assets. Earlier Wednesday, Treasury Secretary Steve Mnuchin said that the U.S. “definitely” needs additional fiscal stimulus.

Stocks may be the ultimate beneficiary of trillions of dollars in economic stimulus from the Fed, according to Savita Subramanian, Bank of America Corp.’s chief U.S. equity strategist. “Liquidity looking for a home” is bolstering the FANG stocks — Facebook Inc., Amazon.com Inc., Netflix Inc. and Google’s owner, Alphabet Inc. — along with their technology-driven peers, she wrote in a report this week.

The danger, though, is that any complication in the economic recovery could see market gains swiftly reverse — at a time when there’s less room for additional support. The pandemic is splintering the world economy, and policy makers can’t risk a premature withdrawal of lifelines to businesses and the most vulnerable people, the Organisation for Economic Co-operation and Development warned. The top U.S. infectious disease specialist Anthony Fauci called the outbreak his “worst nightmare” and warned that the deadly outbreak is far from over.

With file from Reuters