The Dow Jones Industrial Average fell 44.46 points (0.36 per cent) to 12,435.84 in the first trades after two days of solid gains.

The tech-heavy Nasdaq composite shed 8.43 points (0.36 per cent) to 2,349.63 while the Standard & Poor's (S&P) 500 index retreated 5.16 points (0.38 per cent) to 1,357.14.

The market action came as the Fed was set to conclude a two-day meeting widely expected to cut interest rates in the face of economic weakness.

The Commerce Department reported a dramatic slowdown in US economic growth in the fourth quarter, rising by a weak 0.6 per cent annualised rate.

This stoked fears about a recession, although some analysts said the slowdown was exaggerated by an inventory drawdown, and that lower interest rates and an economic stimulus package will ease the downturn.

'The greater than expected weakness was caused primarily by a big drop in inventories that took 1.3 per cent off the number,' said Dick Green at Briefing.com.

'The component breakdown suggests that our current first quarter real GDP estimate will remain near 1.0 per cent or move a bit higher.

That reflects the prolonged slowdown we have expected, but still not a recession.' -- AFP