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The FOMC held short-term interest rates steady between 0% and 0.25%, a highly expansionary move, in a bid to keep the economy growing. Very low interest rates can spur high levels of inflation, however, the policy-making board said despite rising energy prices, long-term inflation expectations appear to be in check.

Traders in the U.S. kept a close eye on the situation in Japan, which is the third largest economy in the world.

An explosion at a Japanese nuclear power plant sent radiation seeping into atmosphere, reaching as far as Tokyo, Japan's densely-populated capital. News of the radiation leakage prompted many to flee and stock up on supplies like food and water.

Japanese stocks posted losses as steep as 16% before finishing the day lower by more than 10%, on the heels of Monday's session that sent stocks sliding 6.2%. Tuesday's drop would equate to a 1271 point move on the Dow.

The two-day losing streak for the Nikkei is the worst since 1987, wiping $620 billion in market value out.

"Instability in [Japan's] nuclear reactors remains the main factor impacting market action and psychology," Peter Boockvar, managing director at Miller Tabak + Co., wrote in a research note.

Tuesday's session was particularly volatile. The Dow was down more in the first five minutes of trading than it has been since October 2008, when it started the day lower by 504 points.