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Stocks slip after Fed trims economic forecasts

/ Source: The Associated Press

Stocks fell in afternoon trading Wednesday after the Federal Reserve lowered its estimates for U.S. economic growth.

According to preliminary calculations, Dow Jones industrial average dropped 80.34 points to 12,109.67. The Standard & Poor's 500 index fell 8.33 points to 1,287.19. The Nasdaq fell 18.07 points to 2,669.19.

The Federal Reserve left interest rates unchanged at the end of its two-day meeting Wednesday. In an updated forecast, the Fed now estimates the economy will grow between 2.7 percent and 2.9 percent this year. That's down from the previous estimate of 3.1 percent to 3.3 percent estimate made after its last meeting in April.

Federal Reserve Chairman Bernanke said the main causes of the recent slowdown are temporary. The Fed expects the economy to pick up next year after the effects of Japan's March 11 earthquake and higher gasoline prices diminish.

The Fed pledged no new help to boost the economy. The central bank's $600 billion bond-buying program draws to a close at the end of this month.

Among heavily traded companies, FedEx Corp. reported a 33 percent jump in income and said it expects global economic growth to continue. The package delivery company's stock rose 3 percent.

Analysts consider results from FedEx and its rival UPS Corp. important indicators for the broader economy because they ship orders for all kinds of businesses.

"I don't think the economy is headed for recession," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. "That means corporate earnings stay strong, and that's the bottom line for the stock market."

CarMax Inc. rose 8 percent, the biggest gain in the S&P 500 index. The dealership owner said profit rose 25 percent on higher used-vehicle prices.

Jabil Circuit Inc. rose 4 percent after the electronics part maker said its earnings doubled last quarter.

AeroVironment Inc. jumped 21 percent after the maker of unmanned aerial drones and charging systems for electric cars said its income rose 13 percent.

In Greece, the new government narrowly won a vote of confidence. That may help it push through budget cuts and other austerity measures that it needs to secure more emergency loans.

The cash will help the country at least delay a default on its debt, an event that would hurt banks and the European economy. Worries about a Greek default have weighed on global financial markets since May.

The S&P 500 jumped 1.3 percent Tuesday on hopes the Greek government would win the confidence vote, extending the market's rally to four days. It was the index's longest winning streak since May. The last time the index climbed for five straight days was in January.