The Fed's comments and its 12th consecutive increase in interest rates left investors concerned that economic growth will weaken while borrowing costs climb.

"They're not done and it's clear to me that these guys really are worried about an inflation bulge," said James Swanson, chief investment strategist at MFS Investment Management, which manages $157 billion in Boston. "You are seeing clouds on the horizon because of inflation."

The Standard & Poor's 500 Index lost 4.25, or 0.4 percent, to 1202.76, paring some of the 2.4 percent gain of the previous two days. The Nasdaq Composite Index, which gets 45 percent of its value from technology shares, slid 6.25, or 0.3 percent, to 2114.05. The Dow Jones Industrial Average fell 33.30, or 0.3 percent, to 10,406.77.

A report showing manufacturing prices were at the highest since May 2004 sent stock indexes down even before the Fed's decision. Speculation that economic growth is slowing while inflation is accelerating weighed on stocks in October, with the S&P 500 losing 1.8 percent for its worst monthly performance since April.

`Very Jittery'

Investors "still seem very jittery," said Ryan Larson, equity trader at Voyageur Asset Management, which manages $8 billion in equities in Chicago. "Any negative news, people are going to react."

The central bank raised the benchmark U.S. interest rate by a quarter point to 4 percent, and said any future increases will be at a "measured" pace.

Indexes gyrated following the release of the Fed's statement as investors deciphered the central bank's comments.

"Core inflation has been relatively low in recent months and longer term inflation expectations remain contained," policymakers also said.

Dell slumped $2.64, or 8.3 percent, to $29.24 for the third-steepest loss in the S&P 500. The world's No. 1 personal- computer maker reported third-quarter sales of $13.9 billion, which trailed the company's prediction of $14.1 billion to $14.5 billion. Sales also missed Dell's forecast in the second quarter.

A measure of technology shares was the biggest contributor to the S&P 500's retreat among 10 industry groups. Intel Corp., the world's largest maker of computer chips, lost 85 cents to $22.65.

The Institute for Supply Management's prices-paid index was 84 in October, higher than economists expected in a Bloomberg News survey. The ISM factory index fell to 59.1 from 59.4 in September. Economists expected 57.2.

Utilities

A measure of utility shares had the biggest drop in the S&P 500 among 10 industry groups, sinking 2 percent. Higher interest rates push bond yields up and make dividend-paying stocks less attractive. The group has a dividend yield of 3.4 percent compared to 2.1 percent for the S&P 500.

TXU Corp. retreated $10.31 to $90.44. The largest electricity supplier in Texas said third-quarter profit excluding some items was $2.35 a share, missing the $2.46 average estimate in a Thomson survey, as higher natural-gas costs cut into earnings.

Four stocks fell for every three that rose on the New York Stock Exchange. About 1.79 billion shares changed hands on the Big Board, 12 percent more than the three-month average.

Exceeding Estimates

Viacom Inc. and IAC/InterActiveCorp advanced after quarterly earnings exceeded estimates.

Viacom added 56 cents to $31.61. The company reported third-quarter profit, excluding some costs, of 47 cents a share, topping the 45-cent average estimate in a Thomson Financial survey of analysts.

IAC/InterActiveCorp, the television and Internet-services company led by Barry Diller, rallied 52 cents to $26.12. IAC said it had a profit of 32 cents a share excluding some costs in the third quarter. On that basis, the company was expected to earn 26 cents, the average estimate of analysts surveyed by Thomson.

Almost two-thirds of the 353 S&P 500 companies that reported results as of yesterday have beaten analysts' estimates, according to Bloomberg analysis of Thomson data. Third-quarter profit is up 15.5 percent.

Computer Sciences Surges

Computer Sciences Corp., the No. 5 U.S. computer-services company, surged $6.75, or 13 percent, to $58 for the best performance in the S&P 500. Lockheed Martin Corp. and three private-equity companies are discussing a purchase price for Computer Sciences of as much as $65 a share, the Wall Street Journal reported, citing people familiar with the matter. Lockheed lost 61 cents to $59.95.

Computer Sciences spokesman Michael Dickerson and Lockheed Martin spokesman Thomas Jurkowsky declined to comment.

Knight Ridder Inc. jumped $4.62 to $58. The newspaper publisher's largest investor, Private Capital Management LP, called for a sale of the company, citing management's inability to boost profit and Knight Ridder's stock price. Private Capital owns 19 percent of Knight Ridder, according to a regulatory filing.

Lower Forecasts

Medco Health Solutions Inc. and Take-Two Interactive Software Inc. slid after they lowered their earnings forecasts.

Medco sank $6.70, or 12 percent, to $49.80 for the steepest drop in the S&P 500. The biggest U.S. pharmacy-benefit manager trimmed its 2005 net income forecast to $1.99 to $2.01 a share from a July prediction of $1.99 to $2.03.

Take-Two, the No. 3 U.S. video-game maker, slumped $3.12 to $17.53. The company reduced its forecast for fiscal 2006 ending Oct. 31 to per-share earnings of $1.15 to $1.45 on sales of $1.35 billion to $1.45 billion. In September, the company predicted profit of $1.25 to $1.55 a share on revenue of $1.4 billion to $1.5 billion.

Nabi Biopharmaceuticals plunged $9.22 to $3.63 after a study showed its StaphVax vaccine against staph infections failed and the biopharmaceutical company said it would stop developing the drug.

S&P 500 shares, called Spiders, rose 36 cents to $120.49. Nasdaq-100 tracking shares, known by their QQQQ symbol, slipped 3 cents to $38.84.

S&P 500 futures expiring in December dropped 3.50 to 1206.30 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures fell 1 to 1585.50.