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Stocks skid 200 points as Fed hints at stimulus slowdown

Stocks accelerated their selloff in the final hour of trading on Wednesday to close over 200 points lower, after the Federal Reserve said it will maintain its bond-buying program, although Chairman Ben Bernanke hinted that the FOMC plans to moderate purchases later this year.

"They don't tie themselves officially into anything but it's clearly what they're going to do," said Jim Paulsen, chief investment strategist at Wells Capital Management. "I think he's more clearly said today than at any other time that he's going to taper before the end of the year, and there's a possibility he could be done by the middle of next year."

The Dow Jones Industrial Average tumbled 206 points, or 1.35 percent, wiping out most of its gains from the previous two days. The blue-chip index logged its seventh-straight triple-digit move.

The S&P 500 and the Nasdaq slumped more than 1 percent each. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, dipped below 16.

All key S&P sectors finished firmly lower, dragged by telecoms and utilities.

Fed policymakers said in a statement the U.S. central bank would keep buying $85 billion in bonds a month and modestly raised its expectations for GDP growth for 2014, from 2.9 to 3.4 percent to 3.0 percent to 3.5 percent. But in a press conference, Bernanke said if the economy continues to improve the asset-purchasing program could start winding down towards the end of 2013 and wrap up in 2014.

Interest rate hikes however, he said, are a separate issue and "still far in the future."

"Wall Street traders expected exactly what the Fed delivered today: slight forecast improvements while providing a crutch to continue with its aggressive monetary policy measures," said Todd Schoenberger, managing partner at LandColt Capital.

"Interestingly, the language in the statement provides a mulligan on the recent 'tapering' comments. But Wall Street has already 'traded out' those statements and bulls will now focus on the comments about the likelihood of an increase in rates not occurring until 2015," he said. "Keeping rates low indicates a continued bull run in equities for the foreseeable future."

Treasury prices fell after the announcement, with the benchmark 10-year yield hitting its highest level since 2011.

Major averages have been volatile since Bernanke said last month that the Fed could begin to pare back its stimulus efforts if the U.S. economy gains momentum. Stocks rallied on Monday and Tuesday this week on the idea that Bernanke will not signal an abrupt end to the bond purchasing program.

President Barack Obama added to uncertainty about Fed policy on Tuesday, when he gave a TV interview in which he suggested that Bernanke would leave at the end of his term in January. Obama said Bernanke had "already stayed a lot longer than he wanted or he was supposed to."

But Bernanke refused to address questions about his future at the central bank.

(Read More:Bernanke Is 'the Ultimate Lame Duck': Langone)

Fed Vice Chairman Janet Yellen is widely seen as the leading candidate to replace Bernanke, but there are other possibilities, including former Treasury Secretary Larry Summers. Yellen's views are seen as similar to those of Bernanke.

On the economic front, interest rates on home mortgages gained for the sixth-straight week to hit their highest level in over a year, according to the Mortgage Bankers Association, pushed higher by worries that the Fed could slow its stimulus program sooner than expected.