The S&P/TSX composite index fell 231 points to close at 14,602.88.
The Canadian dollar dropped 0.75 of a cent to 79.87 cents US.
The Fed has been widely expected to move around mid-2015 but there has been growing speculation it might move later.
While the Fed said Wednesday at the end of its interest rate meeting that it would remain "patient" in beginning to normalize monetary policy, it also pointed out positives about the American economy, including that economic activity is expanding at a solid pace.
"The statement signalled policy-makers view conditions as improving, teeing up for a return to a more normal policy stance," observed RBC assistant chief economist Dawn Desdjardins.
The Dow industrials dropped 195.84 points to 17,191.37, the Nasdaq lost 43.51 points to 4,637.99 and the S&P 500 index was down 27.39 points at 2,002.16.
Oil prices retreated $1.78 to US$44.45 a barrel, the lowest close since early March 2009, after the U.S. Energy Information Administration said U.S. oil supplies rose by 8.9 million barrels last week. That was far higher than the 3.5-million-barrel increase that economists had expected.
Prices have plunged 55 per cent from the highs registered last summer because of a glut of supply on world markets.
The TSX energy sector dropped 4.85 per cent. Cenovus Energy (TSX:CVE) lowered its 2015 capital budget to between $1.8 billion and $2 billion because of the price slump. That figure is more than 15 per cent below last year's spending levels. Its stock dropped $1.73 to $22.94.
The gold sector fell three per cent as February bullion declined $5.80 to US$1,285.90 an ounce.
March copper edged two cents higher to US$2.48 a pound and the base metals group was down 1.5 per cent.
On the earnings front, Canadian National Railway's (TSX:CNR) quarterly profit surged by nearly a third to $844 million or $1.03 per share, six cents ahead of estimates. Revenue was up nearly 17 per cent at $3.2 billion, beating estimates of $3.12 billion. CN also boosted its quarterly dividend 25 per cent to $1.25 a share. CN stock lost $1.13 to $84.03.
"When you look at rails and run they had, it is unrealistic to expect any significant upside unless there is an unforeseen growth catalyst," said Kash Pashootan, portfolio manager at Raymond James in Ottawa.
"Relative to the volatility we have seen in markets and relative to what we’ve seen in their peer group . . . I think investors should be happy with that."
And Apple's quarterly net income rose 38 per cent to $18 billion or $3.06 a share while revenue hit $74.6 billion as it sold 74.5 million iPhones, which also beat estimates. Analysts were expecting earnings of $2.60 a share on revenue of $67.39 billion. Its shares were up 5.65 per cent to US$115.31.
In Canada, CGI Group (TSX:GIB.A) had $236.3 million or 74 cents a share of quarterly net income, up from 60 cents per share or $189.8 million a year earlier. Cash generated from CGI's operating activities increased more than five-fold to $339.2 million and its shares ran ahead $1.49 to $48.41.