Stocks dropped on Wednesday after data showed new home sales fell to its lowest level in at least four decades, adding to worries about a slowing economic recovery.

Single-family home sales tumbled to a 300,000 unit annual rate, the Commerce Department said, as the boost from a popular tax credit faded. The S&P home builders ETF fell 1 percent.

The whole housing market is frozen, said Gary Shilling, president of an investment research firm in Springfield, New Jersey.

There's no incentive to take inventory off the market, and it'll be at least three, but probably five or more years until that excess inventory is cleaned out.

The Dow Jones industrial average <.DJI> slipped 34.84 points, or 0.34 percent, to 10,258.68. The Standard & Poor's 500 Index <.SPX> lost 6.91 points, or 0.63 percent, to 1,088.40. The Nasdaq Composite Index <.IXIC> gave up 17.73 points, or 0.78 percent, at 2,244.07.

Trading was expected to be choppy ahead of a statement from the Federal Reserve's rate-setting committee at about 2:15 p.m. EDT (1815 GMT). The Fed is seen repeating a vow that it will keep interest rates exceptionally low for an extended period and may acknowledge a slight slowdown in the pace of the U.S. economic recovery, according to economists.

Investors are keen for the central bank to not tighten monetary policy too soon, lest it stifle the recovery.

Since 2008 on days of Fed rate decisions, the S&P 500 has risen 79 percent of the time for an average gain of 1.2 percent, according to Birinyi Associates Inc.

Chevron was among the biggest drags on the Dow, slipping nearly 1 percent to $73.45 as oil futures fell 2.5 percent after U.S. industry data showed a surprise jump in crude and gasoline stocks.

On the Nasdaq, Adobe Systems Inc tumbled 5.2 percent to $31.05 after it said revenue surged but profit did not grow as quickly.

(Additional reporting by Ryan Vlastelica; editing by Jeffrey Benkoe)

S&P New Jersey