U.S. stocks fell in a volatile session on Wednesday after the Federal Reserve downgraded its assessment of the economic recovery as it vowed to keep cheap money flowing.

The market bounced between positive and negative territory as investors wrestled over the implications of the Fed's statement in the afternoon on the economy and interest rates. The S&P and Nasdaq finished lower while the Dow was little changed.

The Fed renewed its vow to hold benchmark interest rates exceptionally low, but its less bullish statement hurt a broad range of stocks. Banks were among the day's weakest. The KBW Banks index <.BKX> dropped 0.7 percent while Bank of America Corp lost 0.9 percent to $15.43.

There was definitely a more negative tone, said Dan Cook, senior market analyst at IG Markets in Chicago. The Fed doesn't have a great outlook, but that wasn't totally unexpected with the housing and labor market data we've seen lately.

The Dow Jones industrial average <.DJI> was up 4.92 points, or 0.05 percent, at 10,298.44. The Standard & Poor's 500 Index <.SPX> was down 3.27 points, or 0.30 percent, at 1,092.04. The Nasdaq Composite Index <.IXIC> was down 7.57 points, or 0.33 percent, at 2,254.23.

The Commerce Department said earlier on Wednesday that sales of new homes fell to their lowest level ever in May. Homebuilder shares, however, rebounded after initial weakness on the news on the assumption that the worst was over for the crippled sector. Some analysts speculated the weakness in sales could prompt the government to renew the home buyer's tax credit.

The S&P home builders ETF rose 1.2 percent after falling to a four-month low after the data. D.R. Horton Inc advanced 2.5 percent to $10.47.

Limiting losses in the Dow was Boeing Co , which gained 1.8 percent to $67.45. Earlier, the planemaker received a $216 million contract from the U.S. Air Force.

August crude futures sank 2 percent to $76.35 per barrel as a big increase in U.S. crude inventories cast doubt on demand prospects and a downturn in a broad array of commodities diminished risk appetite.

It's going to be a drawn-out recovery and a while before we start seeing demand for oil pick up again, Cook said.

In earnings news, Jabil Circuit Inc rallied 11 percent to $15.03 a day after it reported third-quarter earnings that beat expectations and forecast strong fourth-quarter results.

Tobacco company Philip Morris International Inc rose 3.3 percent to $46.49 after it said its earnings would grow more than expected this year.

On the downside, Adobe Systems Inc slumped 7.3 percent to $30.38 a day after reporting second-quarter results.

About 8.13 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's estimated daily average of 9.65 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 8 to 7, while on the Nasdaq about 7 stocks fell for each 6 that rose.

(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)

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