As widely expected, the Federal Reserve left rates unchanged in its post-meeting statement Wednesday. The central bank said it is "closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook."
"People are nervous so they probably fasten on the fact that the Fed needs to keep an eye on market and international developments," said Lisa Kopp, head of traditional investments at U.S. Bank Wealth Management.
"People are just jittery and it will take time for things to settle out. ... I think the market being down is just indicating it's a tough market right now and people are nervous," she said.
Read MoreFed funds futures: Only 1 more rate hike, in 2nd half of 2016
Boeing and Apple together contributed to about 120 points off the Dow, with Boeing the greatest weight on the index.
Boeing closed down 8.93 percent for its worst day since Oct. 29, 2001. The stock initially fell more than 9.5 percent after the firm gave full-year guidance below expectations, although the jetmaker reported earnings that beat on both the top and bottom line.
Apple closed down 6.55 percent for its worst day since Jan. 28, 2014. The iPhone maker reported fewer-than-expected unit sales of its flagship product, for the lowest growth in shipments since the iPhone was launched in 2007. Apple also forecast its first revenue drop in 13 years, citing some softness in the critical Chinese market, Reuters reported.
"It's weighing on stocks more broadly given its size and dominance," said Jack Ablin, chief investment officer at BMO Private Bank.
The Nasdaq composite underperformed as Apple weighed and the iShares Nasdaq Biotechnology ETF (IBB) had its worst day in two weeks, closing 3.08 percent lower after briefly spiking 1 percent in opening trade.
Biogen closed 5.15 percent higher, well off session highs of more than 9.5 percent. The firm posted earnings that beat on both the top and bottom line, driven by higher demand for a key drug.
The Dow transports closed 0.88 percent lower, more than reversing an earlier 1 percent gain. Avis Budget was the greatest decliner, while Norfolk Southern, United Continental, FedEx and American Airlines were the only gainers.
U.S. crude oil futures settled up 85 cents, or 2.70 percent, at $32.30 a barrel.Oil pared gains after an initial spike on the Energy Information Administration's report of a build of 8.4 million barrels, more than the prior week's 4.0 million rise but less than an earlier industry report indicated.
Treasury yields edged off earlier highs after the Fed statement release, with the 2-year yield lower at 0.83 percent and the 10-year yield flat at 2 percent.
The U.S. dollar held 0.4 percent lower against major world currencies, with the euro near $1.09 and the yen at 118.62 yen against the greenback. Earlier, the dollar hit a new three-week high versus the yen.
Gold futures hit their highest since early November.
"I think the market talked itself into a dovish statement but it didn't slam the door shut on March so there's a bit of something for everyone there," said Art Hogan, chief market strategist at Wunderlich Securities.
"You have to understand, when we have a two-day Fed meeting, you get so ramped up you have to unwind," he said.
Stocks closed more than 1 percent higher Tuesday and attempted gains in Wednesday morning trade ahead of the Fed statement release.
"I don't think (the Fed statement) does anything to change the expectations that other central banks are going to keep on the path of accommodative policy," Bishop said.
The Bank of Japan is due to release its policy announcement Friday. The European Central Bank kept rates unchanged last week, with comments from ECB President Mario Draghi raising hopes of stimulus at the March meeting.
Fed Chair Janet Yellen is scheduled to hold her semi-annual testimony before Congress in about two weeks.
Read MoreApple, Boeing and Goldman all issue same warning
In economic news, new home sales jumped to a seasonally adjusted annual rate of 544,000 from an upwardly revised November figure of 491,000.
The Treasury auctioned $35 billion of 5-year notes at a high yield of 1.496 percent.