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Dovish Fed scares financial markets

Traders work on the floor of the New York Stock Exchange.
Lucas Jackson | Reuters

Stocks fell sharply and bond prices rose as traders reacted to a new level of worry about China chilling global growth, after the Fed revealed its own concerns.

Stocks were down sharply out of the gate, with the S&P 500 down about 1.2 percent in afternoon trading. The Dow was down as much as 300 points. The Fed Thursday held off on hiking interest rates and pointed to international developments that could slow the economy.

"The biggest signal from the Fed is that the international conditions are weak enough that we should be concerned about a bleed through to domestic conditions and that's what's worrying the market more than anything else," said Gina Martin Adams, institutional equity strategist at Wells Fargo Securities.