Stocks traded flat most of today's session in anticipation of the the Federal Open Market Committee announcement this afternoon, and they tumbled once Chairwoman Janet Yellen said the central bank could start raising interest rates as soon as next spring, earlier than analysts had projected.

The Fed adjusts interest rates to stimulate the economy or keep it from overheating, and Yellen's announcement seems to be a sign the Fed thinks the economy no longer needs such a formidable helping hand. Still, she was careful to say that rates could stay lower than normal "for some time," making clear that she would not act hastily. The Fed's benchmark interest rates affect everything from mortgage rates to Treasuries to inflation, so an increase would be felt across the economy.

The central bank also continued to taper its bond-buying program, cutting another $10 billion to reduce the total to $55 billion.

After the drop, the Dow Jones Industrial Average (^DJI 0.23%) finished the day down 114 points, or 0.7%, while the S&P 500 closed with a loss of 0.6%. 

Among stocks making headlines today was KB Homes (KBH 2.73%), which jumped 5.9% after beating estimates in its quarterly report. The homebuilder posted its first first-quarter profit since 2007 at $0.12 a share, up from a $0.16 loss a year ago. Analysts had expected a profit of just $0.08. The number of homes delivered actually fell from 1,485 a year ago to 1,442, because of a decline in sales in the West Coast region, but a 12% increase in average selling price helped lift revenue 11% to $450.7 million, ahead of estimates of $435.3 million. Management credited the improvement in selling price and profits to its "strategic operational targeting of attractive, land-constrained locations that generally feature higher household incomes and demand for larger homes." Backlog increased 4% in another promising sign as the company look poised for a successful spring season. 

After hours, shares of Guess? (GES -0.16%) were moving in the wrong direction, falling 6% on disappointing guidance in its earnings report. The fashion label had a strong fourth quarter, delivering a per-share profit of $0.83 on estimates of $0.79 while revenue fell 5.7% to $768.4 million, beating expectations $763.2 million. Same-store sales declined 3% for the period as comps fell in all three of the company's principal regions, North America, Europe, and Asia. CEO Paul Marciano said the environment in North America remains "challenging," but was encouraged by trends in Europe. Still, the weakness in North America was enough to provoke the apparel-maker's weak guidance as it sees full-year EPS of $1.40-$1.60, well below the consensus at $2.03. Separately, the company lifted its quarterly dividend 12.5% to $0.225, giving it a dividend yield.