NEW YORK US STOCK retreated on Thursday as the market digested a rally inspired by a Federal Reserve decision to pump another trillion dollars into the financial system to fuel an economic rebound.

At the closing bell, the Dow Jones Industrial Average fell 86.58 points (1.16 per cent) to 7,400, following gains in six of the prior seven sessions.

Wall Street had rallied on Wednesday and European markets followed with strong gains on Thursday after the Fed's surprise announcement on buying up to $US300 billion (S$452 billion) in Treasury bonds and an additional US$850 billion in other debt in a bid to bring down lending costs and fire up the moribund economy.

Patrick O'Hare at Briefing.com said the Fed's actions got a positive initial from the stock market but that the move will not be a quick fix for the slumping US economy.

'Lower rates will be a consequence of the Fed's actions. It is the potential unintended consequences, though, that create some concern when contemplating the longer-term outlook,' he said.

'The Fed runs a heightened risk of inflating the Treasury market bubble and stoking inflation itself. What's more is that the Fed has made its job of managing monetary policy that much more difficult when economic evidence suggests we are emerging from the financial crisis and the recession.' -- AFP