U.S. stocks dropped as investors questioned the effectiveness of the Federal Reserve's latest unconventional attempt to bolster the faltering U.S. economy. The Dow Jones Industrial Average tumbled 283.82 points, or 2.5%, to 11,124.84. The Standard & Poor's 500 stock index shed 35.33 points, or 2.9%, to 1166.76, and the Nasdaq Composite lost 52.05 points, or 2.0%, to 2538.19. The bulk of the declines came late in the trading day, after the Fed said it would increase its share of longer-term Treasurys by $400 billion by June 2012 in an effort to make credit cheaper and spur spending and investment. The policy move, dubbed Operation Twist, effectively changes the composition of its securities portfolio so it holds more longer-term debt. To help keep mortgage rates low, the Fed also said it would reinvest the proceeds from maturing agency debt and mortgage backed securities into mortgage related debt. While the market had largely expected the news, the Fed's grim read on the economy was discouraging, and investors remained skeptical about the long-term effectiveness of the action to spur borrowing, hiring and spending. The Fed also notably darkened its view of the possible effects of the sovereign-debt crisis in Europe. Unlike last go-round, the Fed specifically cited strains in global financial markets. Underscoring the broad-based skepticism, three out of 10 voting officials opposed the action at the conclusion of a two-day meeting of the Fed's policy making body the Federal Open Market Committee highlighting continued divisions within the central bank as it tries unorthodox new ways to provide support to the economy. In addition to the central bank move, stocks were being pushed around by a parade of downbeat headlines from companies in the materials, financial and technology sectors. Bank stocks fell after Moody's Investors Service downgraded the credit rating of Bank of America and Wells Fargo, citing the decrease in the probability of government support in a banking crisis. Bank of America fell 7.5% after Moody's downgraded the Charlotte, N.C., lender by several notches, to Baa1, while Wells Fargo slipped 3.9%, erasing its early gains. Citigroup, which saw its short-term rating lowered and its long-term rating upheld, fell 5.2%. Morgan Stanley dropped 8.6%, and Goldman Sachs shed 4.6%. Also weak were materials and industrial stocks, after two major coal producers lowered their outlooks for the year. Walter Energy fell 12% after the metallurgical-coal producer provided an earnings outlook for the second half of its fiscal year that was well below expectations, and Alpha Natural Resources dropped 17% to lead the falling S&P 500 stocks after lowering its guidance regarding shipments for the year.

European stock markets fell Wednesday, with oil, bank and drug shares driving declines as investors awaited the outcome of the U.S. Federal Reserve's two-day policy meeting and also continued to fret over Greece. Extending earlier losses, the Stoxx Europe 600 index dropped 1.6% to close at 225.33. Greece's cabinet Wednesday considered demands for additional budget cuts to gain the release of an aid tranche needed to avoid default. The government Tuesday said it made progress in two days of conference-call talks between Finance Minister Evangelos Venizelos and officials of the so-called troika of international lenders, the European Union, the European Central Bank and the International Monetary Fund. The Finance Ministry said talks would continue over the weekend in Washington, where Venizelos will attend an annual IMF meeting. Meanwhile, German Chancellor Angela Merkel and Greek Prime Minister George Papandreou are expected to meet Tuesday in Berlin, Dow Jones Newswires reported, citing Merkel's spokesman. Greek stocks maintained gains Wednesday, though other markets fell. The Athens General Index rose 1.4%. Shares of Coca-Cola Hellenic Bottling Co. added 7.3%. French banks failed to hold on to an earlier rebound, with Societe Generale SA sliding 1.3%, BNP Paribas SA losing 1.8% and Credit Agricole SA dropping 2.4%. Insurer AXA SA also fell, declining 3.1%. The French CAC 40 index fell 1.6% to close at 2,935.82. Pharmaceutical group Sanofi SA fell 2.1%, while Peugeot SA was down 5.7% and Renault SA lost 3.8%. Auto stocks fell in Germany as well, with Volkswagen AG down 2.6% and Daimler AG down 3.8%. The German DAX 30 index fell 2.5% to settle at 5,433.80. Shares of Deutsche Lufthansa AG dropped 5% after Deutsche Bank analysts cut the airline to sell from hold. Shares of Statoil ASA fell 1.1%, Royal Dutch Shell PLC shed 2%, BP PLC lost 2.5% and Total SA sank 1.2%. London's FTSE 100 index fell 1.4% to end at 5,288.41. Rio Tinto PLC dropping 4.2%. Chief Executive Tom Albanese said in a Financial Times interview that some of the company's customers are requesting delays in metals shipments.

Asian stocks were mostly higher after a choppy session Wednesday, with a U.S. monetary-policy meeting on tap for later in the global trading day and with European sovereign-debt woes never far from the spotlight. Hong Kong's Hang Seng Index fell 1% to 18824.17, while the more volatile Shanghai Composite Index jumped 2.7% to 2512.96. The Nikkei Stock Average rose 0.2% to 8741.16 in Tokyo, India's Sensex fell 0.2% to 17065.15 and the Kospi climbed 1% to 1854.28 in Seoul after seesawing earlier in the day. Amid few signs of progress in Europe toward heading off a Greek default, Japan's Nomura Holdings slipped 0.3% and HSBC Holdings declined 1.5% in Hong Kong. Some tech majors managed to gain ground. Japan's Renesas Electronics jumped 5.4%, with Dow Jones Newswires reporting that the firm was upgraded to neutral from underperform by SMBC Nikko securities. The outlook for technology-sector earnings may be improving. U.S. technology giant Oracle late Tuesday reported a 36% increase in fiscal-year profit and an in-line outlook. Additionally, profit growth for Toshiba and Mitsubishi Electric means that both firms are expected to raise their interim dividend payouts to the highest level since 2008, the Nikkei reported. Some major exporters also moved higher, with Canon up 0.7% in Japanese trade, while Li & Fung jumped 4.1% in Hong Kong. However, Toyota Motor shares were down 0.5% in Tokyo after a massive typhoon hit Japan, reportedly causing at least four deaths. Toyota has halted operations at 11 plants in the area.

Base metals on the London Metal Exchange seesawed Wednesday as market participants voiced concerns that commodities are trading on the vagaries of falling equities and macro-economic sentiment rather than supply and demand fundamentals. The benchmark LME copper price for delivery in three-months fell to a nine and a half month low of $8,234.75 a metric ton before recouping most of its losses to close at $8,299/ton. The drop was largely in line with a 1.4% fall in London's FTSE 100 equity index. Crude futures fell in choppy trading Wednesday, after the Federal Reserve announced plans to boost the listless U.S. economy by purchasing longer-dated government debt. The dollar strengthened on the Fed news a stronger dollar can drive oil prices down, because it makes the dollar-denominated commodity more expensive for holders of other currencies. Light, sweet crude for November delivery settled down $1, or 1.15%, at $85.92 on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange, which had been trading higher for most of the day, settled down 18 cents, or 0.16%, at $110.36 a barrel. Gold futures eased Wednesday after the Fed's announcement, which curbed demand for the metal as a safe place to park cash. Gold for December delivery, the most actively traded contract, recently fell $16.70, or 0.9%, to $1,792.40 a troy ounce in post-settlement electronic trading. The contract settled down 0.1% at $1,808.10 during floor trading.