Stocks dropped on Wednesday after the Federal Reserve cut its forecasts for U.S. economic growth this year and next, without hinting at further plans for stimulus.

Investors hoping for positive comments from Fed Chairman Ben Bernanke were disappointed, and that gave them a reason to sell after a four-day rally that had lifted stocks from three-month lows.

Everyone decided that was a 'sell' signal, said Albert Meyer, portfolio manager of Mirzam Capital Appreciation Fund in Plano, Texas. It's nothing new. We didn't expect anyone to come out and say the economy is growing.

Some analysts see range-bound trading ahead, with 1,295 seen among the S&P 500's first targets of resistance.

Bryant Evans, investment advisor and portfolio manager of Cozad Asset Management, in Champaign, Illinois, said the market could go sideways to down for three months as the economy takes its time to build back momentum.

Expectations about a second round of Fed stimulus last fall helped ignite an extended rally in stocks. There is some hope the Fed will conduct another round of asset buying, but most economists see it as unlikely at this time.

The Dow Jones industrial average <.DJI> slid 80.34 points, or 0.66 percent, to end at 12,109.67. The Standard & Poor's 500 Index <.SPX> fell 8.38 points, or 0.65 percent, to 1,287.14. The Nasdaq Composite Index <.IXIC> lost 18.07 points, or 0.67 percent, to close at 2,669.19.

The S&P 500 is down 5.6 percent from its early May high.

The market was up four days in a row coming into today, the rally has been OK, but it hasn't shown enough strength to break the downside momentum the market has had since May, said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville.

After the closing bell, Bed Bath & Beyond Inc shares rose 3.3 percent to $55.84 after the retailer posted a quarterly profit that handily topped Wall Street's expectations and boosted its full-year earnings forecast.

ADOBE SLIDES, BUT FEDEX FLIES

Weighing on tech during the regular session, Adobe Systems Inc shares slumped 6.3 percent to $30.01 a day after the software maker reported a 54 percent jump in quarterly profit, but warned of weakness in European demand.

Among the day's gainers, economic bellwether FedEx Corp rose 2.6 percent to $91.44 after the shipping group reported strong fourth-quarter profit and forecast robust 2012 earnings.

In its statement, the Fed, as widely expected, said it will maintain interest rates at exceptionally low levels for an extended period. It also reiterated it was ending its $600 billion bond-buying program at the end of the month.

The central bank's policy-makers, at the end of a two-day meeting, lowered the Fed's gross domestic product forecast for 2011 to a growth rate of just 2.7 percent to 2.9 percent -- down from an April projection of 3.1 percent to 3.3 percent.

The Fed also reduced its 2012 GDP growth forecast to a range of 3.3 percent to 3.7 percent, below its previous projection.

A spate of weaker-than-expected economic data has underscored fears that the recovery is faltering, and raised worries about how the economy will fare without more support from the government.

Another indicator of pessimism: Net short positions by hedge funds on the S&P 500 have risen recently, according to Societe Generale cross-asset research.

Billionaire investor Ken Fisher said in an interview on Wednesday he believes the U.S. stock market will finish only slightly higher this year before returning to the trend of the previous two years, when prices doubled in the wake of the financial crisis in 2008.

Volume once again was lighter than normal, with just 6.2 billion shares traded on the New York, Nasdaq and NYSE Amex exchanges, compared with a daily average of 7.58 billion.

Declining stocks outnumbered advancing ones on the NYSE by nearly 17 to 12. On the Nasdaq, decliners beat advancers by about 17 to 8.

(Reporting by Caroline Valetkevitch; Additional reporting by Rodrigo Campos, Ashley Lau and Edward Krudy; Editing by Jan Paschal)