The Fed announced Wednesday that it would hold steady on interest rates and indicated that no more hikes would be coming this year. That was a reversal from its stance three months ago, when the central bank projected two interest rate hikes for 2019.
That announcement sent the 10-year Treasury yield to its lowest in a year, with the Dow Jones Industrial Average and S&P 500 also taking a knock as bank stocks sold off.
The 30-stock Dow fell 141.71 points to close at 25,745.67, while the S&P 500 finished its trading day 0.3 percent lower at 2,824.23. The Nasdaq Composite, on the other hand, closed a touch higher, up 0.07 percent at 7,728.97.
"Markets were geared up for a relatively dovish Fed and in the event got something even more dovish than they (were) expecting," Ray Attrill, head of foreign exchange strategy at National Australia Bank, wrote in a morning note.
The Fed currently holds its benchmark funds rate in a range of 2.25 percent to 2.5 percent. The rate is used as a key for determining interest on most adjustable-rate consumer debt, like credit cards and home equity loans.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 95.894 as it attempted to recover after slipping sharply from highs above 96.4 seen in the previous session.
The Japanese yen traded at 110.40 against the dollar, after seeing lows above 111.6 in the previous session.
Meanwhile, investors continue to keep a lookout for developments on the U.S.-China trade front, with U.S. President Donald Trump telling reporters on Wednesday that Washington's tariffs on Beijing could stay on for a "substantial period of time." His comments confused some traders, as Trump also said a deal is "coming along nicely."
A day before the president's comments, Bloomberg News reported that some U.S. officials are worried China could walk back on some concessions. Negotiations will restart next week when U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin travel to Beijing. Those reports buffeted stocks on Tuesday.
Oil prices were mixed in Asia's afternoon trade, with the international benchmark Brent crude futures rising almost 0.1 percent to $68.56 per barrel. U.S. crude futures, on the other hand, declined 0.15 percent to $60.14 per barrel.
— Reuters, CNBC's Fred Imbert and Jeff Cox contributed to this report.