TORONTO - The Toronto stock market finished slightly lower Wednesday after the U.S. Federal Reserve announced it was leaving its key interest rate unchanged at 0.25 per cent -- and said the economy is improving.

"The Fed upgraded its assessment of the economy slightly since the last meeting, stressing that activity is strengthening and that the recovery looked to be moderate as opposed to weak in December," said Sal Guatieri, senior economist at BMO Capital Markets.

"So the Fed is feeling a little better about the economic outlook."

The S&P/TSX composite index moved down 17.08 points to 11,344.11 as the Fed also said it would keep rates near zero for an extended period.

The Canadian dollar was off 0.2 of a cent to 93.92 cents US.

Commodity stocks again led the market lower as investors continued to react to moves by China to curb bank lending. The worry is that tighter monetary policy in China to check inflationary pressures could kill off the limited economic recovery around the world.

"China was definitely a key data point . . . (with) their comments on slowing their economy," said Jeff Bradacs, senior investment analyst at MFC Global Investment Management.

"Especially given our commodity focus -- nearly half of our market is linked to commodity prices."

The market has also been held back in recent days by U.S. President Barak Obama's push to restrict trading by major financial institutions and concerns that Fed chairman Ben Bernanke might not be reappointed.

The TSX had been depressed all day, in part because of poor U.S. housing sales data that raised fresh concerns about the economy. The U.S. Commerce Department reported that new U.S. home sales unexpectedly fell 7.6 per cent last month, capping the industry's weakest year on record.

The base metals sector fell 3.44 per cent with March copper down 12 cents to US$3.23 a pound. Teck Resources (TSX:TCK.B) fell $1.65 to C$37.05 and Labrador Iron Mines Holdings (TSX:LIM) declined 25 cents to $4.31.

Bullion prices headed lower with the February gold contract on the New York Mercantile Exchange down $13.80 to US$1,084.50 an ounce. Kinross Gold Corp. (TSX:K) faded 44 cents to C$18.05 and Goldcorp Inc. (TSX:G) declined 68 cents to US$38.05 as the gold sector on the TSX fell 1.29 per cent.

The industrials sector lost 0.58 per cent but Canadian National Railway (TSX:CNR) shares came back from early losses to move up 25 cents to $55.93 after reporting that profits increased to $582 million in the fourth quarter despite lower revenue. The railway also increased its quarterly dividend from 25 cents to 27 cents per share. The railway said it was aiming for double-digit earnings growth over the $3.24 per share achieved in 2009.

Shares in Canadian Pacific Railway (TSX:CP), which reports earnings on Thursday, added 13 cents to $54.41, while Bombardier Inc. (TSX:BBD.B) declined 17 cents to $5.07.

The energy sector was down 0.6 as demand concerns continued to put pressure on oil prices, with the March crude contract on the Nymex down $1.04 to US$73.67 a barrel. EnCana Corp. (TSX:ECA) fell 32 cents to C$33.44 and Suncor Energy (TSX:SU) was down 32 cents to $34.71.

The tech sector was the main advancer, up 1.27 per cent in the wake of Apple Inc. unveiling a tablet-style computer that looks like a large iPhone. Apple shares rose $2.04 to US$207.98.

Research In Motion Ltd. (TSX:RIM) gained $2.57 to C$68.18.

Telecoms also advanced, with Rogers Communications (TSX:RCI.B) ahead 60 cents at $33.34.

The financial sector also brought the TSX up from early lows, up 0.72 per cent with Scotiabank (TSX:BNS) rising 64 cents to $45.79 and Bank of Montreal (TSX:BMO) 62 cents to $54.

The TSX Venture Exchange lost 24.73 points to 1,509.38.

The Fed's more upbeat assessment of the U.S. economy pushed New York markets higher as the Dow Jones industrial average gained 41.87 points to 10,236.16.

The Nasdaq composite index rose 17.68 points to 2,221.41 while the S&P 500 index was 5.33 points higher at 1,097.5.

A major decliner in New York was Japanese automaker Toyota Motor Corp. Its shares fell $7.08, or 8.16 per cent, to US$79.70 after halting sales of eight of its models and production at six of its North American assembly plants as it deals with a faulty gas pedal that has led to a massive recall and production halt.

The supplier is Indiana-based CTS Corp. and the problem part was manufactured at its plant in Mississauga, just west of Toronto. CTS shares declined 19 cents to US$8.44.

In other earnings news, Yahoo Inc. reported better-than-expected results after the market closed Tuesday. The Internet company also provided a promising outlook, but its shares lost early gains to move down a cent to US$15.98.

Caterpillar shares were down $2.41 to US$53.44 as the world's biggest mining and construction equipment company reported fourth-quarter profit of US$232 million, down 65 per cent from a year ago. Shares in Vancouver-based Finning International, the world's largest Caterpillar equipment dealer, were 49 cents lower at C$17.

AGF Management Ltd. (TSX:AGF.B) reported Wednesday a fourth-quarter profit of C$45.5 million, reversing a $19.3-million loss posted in the same period a year earlier. Its shares were up 83 cents at $16.03.

A favourable tax adjustment helped boost net earnings at Montreal-based IT services company CGI Group Inc. (TSX:GIB.A) to $111.2 million in its latest quarter, up 39 per cent from year-earlier profit and above analyst expectations. CGI shares added 15 cents to $14.84.