(March 20): US stock indexes dropped on Thursday, as worries about the repercussions of an ongoing global trade war resurfaced, a day after the Federal Reserve left interest rate steady but warned of an uncertain economic backdrop.

Global markets have been roiled with volatility over the past few weeks as investors were concerned that President Donald Trump's aggressive stance on trade policies could stoke inflation, tip the economy into a recession and disrupt the Fed's monetary policy easing cycle.

The Fed maintained current interest rates on Wednesday as expected and reaffirmed its forecast for two 25 basis point reductions by the year-end.

However, adding to markets' unease, the central bank also projected slightly reduced growth and increased inflation for the year, alongside a modest uptick in the unemployment rate by 2025.

All the three major stock indexes closed higher by over 1% each in the previous session. However, the S&P 500 is down 3.5% so far this year and the Nasdaq is lower by 8%. The indexes' declines have erased all gains since Trump's November election.

"We got a slightly excited on Wednesday by the dovish tone that came out the press conference (of Fed chair Jerome Powell)," said Lilian Chovin, head of asset allocation at Coutts.

"This is not the best environment for investors to take a lot of risk. We should expect markets to remain choppy until things quiet down and we have more clarity on Trump's policies," Chovin added.

A key focus for the markets will be the upcoming implementation of new reciprocal and sectoral tariffs, slated to take effect in early April.

Market participants are currently factoring in 63 basis points of easing from the Fed this year, placing odds of 25 bps rate cut in June at 60%, according to CME Group's Fedwatch tool.

Data showed initial jobless claims were largely in line with estimates in the week prior.

A gauge of manufacturing activity in the US mid-Atlantic region rose more than expected in March. However, the data also suggested increasing price pressures.

At 09:43am ET the Dow Jones Industrial Average fell 142.20 points, or 0.35%, to 41,816.93, the S&P 500 lost 16.45 points, or 0.29%, to 5,658.84 and the Nasdaq Composite lost 43.42 points, or 0.24%, to 17,707.37.

Ten of the 11 S&P 500 sectors declined with industrials leading with a 0.7% drop.

The CBOE volatility index, also known as Wall Street's fear gauge, gained 0.53 points and was last at 20.37.

Darden Restaurants reversed premarket losses and was last up 5.5%. The Olive Garden owner narrowed its annual profit forecasts, making it the latest among a slew of companies to issue cautious forecasts as a consequence of tariff uncertainty.

Accenture fell 9.7% after the consultancy firm said the Trump administration's efforts to reduce federal spending have led to delays and cancellations of new contracts.

Growth stocks were mixed, with Meta and Nvidia up over 1.2% each, while Amazon.com and Microsoft were down marginally.

Tesla lost 1.1%. The automaker recalled over 46,000 Cybertruck vehicles in the United States.

Declining issues outnumbered advancers by a 2.58-to-1 ratio on the NYSE and by a 2.05-to-1 ratio on the Nasdaq.

The S&P 500 posted two new 52-week highs and no new lows, while the Nasdaq Composite recorded 10 new highs and 38 new lows.

Uploaded by Magessan Varatharaja