YAHOO [BRIEFING.COM]: Action was muted ahead of the latest FOMC policy statement, which spurred buying and sent stocks to their best levels of the year. However, the new highs proved unsustainable as stocks rolled over and closed at session lows with their worst loss since the first of the month.

The tone to premarket trading had been mildly positive, but stocks lost their way after the opening bell and spent most of the morning drifting in mixed fashion. As such, gains and losses in the broader market were relatively contained.

However, telecom steadily outperformed for the entire session. It finished 1.6% higher as the only major sector to post a gain. However, its lack of relative size limited its leadership.

Energy stocks traded with considerable weakness for the entire session. It finished 1.9% lower, hampered by bearish oil inventory data, which showed a build of 2.86 million barrels when a draw of 1.40 million had been expected. Crude prices to finish 3.9% lower at $68.99 per barrel.

Despite the drop in oil prices, airline stocks slumped. In turn, the Amex Airline Index shed 4.3%. US Airways (LCC 4.52, -0.71) disappointed by announcing the sale of 26 million shares of common stock. Meanwhile, AMR Corp (AMR 7.78, -0.66) priced its 48 million common share offering at $8.25 per share, which is slightly below the previous session's closing price.

Financials were the worst performing major sector in the S&P 500, despite trading quietly in the early going. Late pressure sent the sector 2.1% lower.

Materials stocks finished not far behind financials, however. The sector dropped 2.0% amid weakness in commodities stocks and commodities prices. Softer commodities prices sent the CRB Commodity Index down 1.0%.

Weakness among commodities was exacerbated by a stronger dollar, which fell to new 2009 lows immediately after the release of the latest Fed policy statement. However, it was able to rebound to a 0.3% gain. Despite its strong finish, many currency traders continue to bet against the greenback.

The latest FOMC policy statement, which indicated that economic activity has picked up since its severe downturn. Neither that, nor the Fed's belief that economic conditions are likely to warrant exceptionally low levels of the fed funds rate (left unchanged at 0.00% to 0.25%, as expected) for an extended period came as much of a surprise. The FOMC went on to say that it will purchase $1.25 trillion of agency mortgage backed securities and $200 billion agency debt, but it will gradually slow the pace of purchases to promote a smooth transition in markets.

Stocks in the broader market attracted support with the statement's midafternoon release. That drove the S&P 500 to session highs and a gain of 0.8%. Ford (F 7.36, +0.35) and General Mills (GIS 63.80, +2.83) were primary gainers. Ford benefited from its view that the U.S. auto market is looking good and vehicle sales are expected to increase, while General Mills posted better-than-expected earnings for its latest quarter and issued upside guidance.

Still, their strength wasn't enough to stop some late-session selling, which culminated in a 1.0% loss for the S&P 500. This is only the second time this month that the S&P 500 lost at least 1%, though.

Treasuries responded favorably to the Fed's announcement, but were able to hold their gains. The benchmark 10-year Note finished roughly 10 ticks higher, which put its yield back near 3.40%. Prior to the announcement they had been showing weakness, uninspired by news that a $40 billion auction of 5-year Treasuries produced a high yield of 2.47% and a bid-to-cover ratio of 2.4. DJ30 -81.32 NASDAQ -14.88 NQ100 -0.6% R2K -1.2% SP400 -1.5% SP500 -10.79 NASDAQ Adv/Vol/Dec 1023/2.70 bln/1668 NYSE Adv/Vol/Dec 1063/1.32 bln/1958