A look at highlights from the day's business news:

Stocks recoup losses after Fed decision

Stocks pared sharp losses to close only modestly lower Tuesday after the Federal Reserve took a cautious stance about the recovery.

After falling as much as 147 points earlier in the session, the Dow Jones industrial average was off 53 points, or 0.5 percent, to close at 10,644.86, according to early tallies.

The S&P 500 lost 7 points, or 0.6 percent, to end at 1,121.08, and the Nasdaq dropped 29 points, or 1.2 percent, to close at 2,277.17.

As was widely expected, the central bank said it would leave short-term interest rates unchanged in a range between zero percent and 0.25 percent. But the Fed gave its most bearish outlook in more than a year, saying the economic recovery is weakening.

Dollar erases gains after Fed grows more pessimistic

The dollar fell against the yen and pared back earlier gains against the euro after the Federal Reserve cast a shadow over hopes for a stronger economic recovery.

The dollar inched up slightly - about 0.26 percent - against the euro to $1.3186 and 0.19 percent against the British pound to $1.5861. The greenback also fell 0.55 percent against the Japanese yen to ¥85.38, nearing its 15-year low around ¥84.81.

The dollar posted larger gains against foreign currencies earlier in the session, rising more than 1 percent against the euro and pound.

The dollar pared back its earlier gains after the Federal Reserve said it plans to stimulate the economy by keeping rates near zero percent and repurchasing government debt, Kathy Lien, director of currency research at GFT Forex said in an e-mail to investors.

Treasurys rise

Prices for U.S. Treasurys gained Tuesday after the Federal Reserve announced plans to reinvest in the market and issued a cautious economic outlook.

The benchmark 10-year note gained 18/32 to 106-8/32, and its yield fell to 2.77 percent from 2.84 percent late Friday. Bond prices and yields move in opposite directions.

The 30-year bond was up 4/32 to 106-8/32 and its yield was 4.01 percent. The two-year note edged up 1/32 to 100-6/32 with a yield of 0.53 percent, while the five-year note rose 12/32 to trade at 101-14/32 and yielded 1.45 percent.

The Federal Reserve announced plans to reinvest principle payments from the central bank's holdings of mortgage-backed securities and other assets into longer-term Treasurys.

The move is part of a plan to support the economic recovery while maintaining the current size of the Fed's balance sheet, the central bank said in a policy statement. The Fed said it expects to begin buying Treasurys under this policy on or around August 17.

- CNNMoney.com reporters Julianne Pepitone, Hibah Yousuf and Ben Rooney contributed to this report.