Shares of Dell, the world's No 1 PC maker, fell 8.3 percent to $29.24 on Nasdaq after hitting $28.81, their lowest price in more than two years. Dell on Monday posted preliminary third-quarter earnings below expectations and lowered its revenue forecast.
The Dow Jones industrial average was down 33.30 points, or 0.32 percent, to end at 10,406.77. The Standard & Poor's 500 Index was down 4.25 points, or 0.35 percent, at 1,202.76. The technology-laced Nasdaq Composite Index was down 6.25 points, or 0.29 percent, at 2,114.05.
Stocks briefly pared some declines after the Fed's announcement. The central bank's policy-making panel raised the benchmark interest rate a quarter point to 4 percent, its highest level in more than four years, and said long-term inflation pressures were "contained."
Still, the Fed described monetary policy as "accommodative," hinting there's room to raise rates further, and said the economy's growth was still strong.
"The Fed statement was clear about the likelihood of further rate increases," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. "That outlook, combined with Dell's warning, was enough to damp demand for stocks today."
The disappointing Dell outlook helped drive other computer-related shares lower, analysts said. Intel Corp, which supplies chips for Dell's computers, fell 3.6 percent, or 85 cents, to $22.65 on Nasdaq. Shares of financial services stocks also fell after the Fed's rate decision, with the Philadelphia KBW index of bank stocks down 0.5 percent. Bank of America Corp fell 0.3 percent, or 12 cents, to $43.62 and Wells Fargo & Co declined 0.5 percent, or 31 cents, to $59.89 on the New York Stock Exchange. Rising interest rates can make it more difficult for banks to make money.
Shares of Nabi Biopharmaceuticals plunged nearly 72 percent - a drop of $9.22 - to $3.64 on Nasdaq after it said its experimental vaccine against staphylococcus aureus bacteria failed in a late-stage trial.
Shares of big US automakers General Motors Corp and Ford Motor Co declined after both companies reported declines of 23 percent in October US sales on Tuesday.
GM, a Dow component, slid 0.8 percent, or 21 cents, to $27.19 on the NYSE. Shares of its rival Ford fell 1.2 percent, or 10 cents, to $8.22, also in NYSE trading.
After the market opened, the Institute for Supply Management said its manufacturing index dipped to 59.1 in October from 59.4 in September. Economists in a Reuters survey had expected a median reading of 57.0.
The prices paid index, a measure of inflation, rose to 84 last month, from 78 a month earlier.
Trading was active on the New York Stock Exchange with 1.79 billion shares trading hands, above last year's daily average of 1.46 billion shares. NYSE declining shares outnumbered gainers by a ratio of less than 3 to 2.
On Nasdaq, 1.95 billion shares were traded, above last year's daily average of 1.88 billion. Nasdaq decliners exceeded gainers by a ratio of about 3 to 2.