By Anora Mahmudova, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks dropped and bond yields surged Wednesday after Federal Reserve chairwoman Janet Yellen said that rate hikes could happen about six months after the Fed wraps up bond buys.

Yellen fielded questions from the press following the Fed policy announcement in her first news conference as the Fed chairwoman, succeeding Ben Bernanke. The FOMC decided to trim the bond purchases by another $10 billion this month and changed the way it targets unemployment and inflation in deciding short-term interest rates.

The Fed said it would now consider a "wide range" of factors instead of relying mainly on the unemployment rate. The Fed statement also stressed that the bank could keep short-term rates below what is viewed as "normal" even if employment levels and inflation hit its targets.

The S&P 500 (SPX) fell 11.48 points, or 0.6%, to 1,860.77, most of the losses coming after the comment from Yellen during the press conference. The Dow Jones Industrial Average (DJI) dropped 114.02 points, or 0.7%, to 16,222.17.

The Nasdaq Composite (RIXF) shed 25.71 points, or 0.68%, to 4,307.60.

Read the recap of our live stock-market coverage.

See also: Recap of live coverage of the Fed decision and the Janet Yellen news conference.

Stocks, which were close to flat before the statement, retreated after the statement. But the hard drop, which took the Dow down more than 200 points, came when a reporter asked Yellen how long the Fed would wait to start raising rates after it stops buying bonds in what's known as quantitative easing.

She said the Fed's language "probably means something on the order of around six months, that type of thing." The taper of the Fed's bond purchases is expected to end in October or November, putting the potential first rate hike on course for April or May.

Yields on 10-year Treasurys surged, gold prices fell further and the dollar spiked against the Japanese yen after the Fed announcement and Yellen comments. Traders in fed funds futures moved up their bets on rate hikes by two meetings, to April 2015.

"Things where down, but not a lot until Yellen dropped the bomb that QE would be done by this fall. Of course, with five meetings to go and $10-$15 billion taper per meeting, that brings us right to October. Still, this comment caught many traders off guard and provided some afternoon fireworks to the downside," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

Earlier, a batch of mixed earnings did little to influence otherwise cautious sentiment.

Among individual stocks, shares of First Solar Inc. (FSLR) jumped 21% to top the S&P 500 index after the company forecast strong earnings and said it is collaborating with GE to develop a more cost-effective photovoltaics power plant design.

Shares in KB Home (KBH) jumped 5.9% after the home maker swung to profit in its fiscal first quarter, beating analysts estimates.

Nu Skin Enterprises (NUS) shed 5.8% after it said in a 10-K filing on Tuesday that it expects to be fined and potentially face other sanctions in China following an investigation into its business practices.

Shares of Hewlett-Packard Co. (HPQ) rose 3.5% as the tech giant is scheduled to host a shareholders meeting later Wednesday following the release of interim financial statements.

Cigna Corp. (CI) shares gained 3.3% after steep losses recently. The stock is down over 8% year to date .

Pacific Sunwear of California Inc. (PSUN) shares rose 3.7% after the retailer posted better-than-expected results for the fourth quarter on Tuesday after the bell.

In overseas markets, Asia had a mixed day, with the Nikkei 225 giving up a more than 1.2% gain at one point to close up just 0.4%, while Chinese stocks went nowhere. European markets slipped, while the FTSE 100 index rose after the release of minutes from the latest Bank of England Monetary Policy meeting and the latest jobs data. (GBPUSD)

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