* Fed leaves rates unchanged amid global concerns
* Market reacts to Fed news with highly volatile trading
* Stocks hit highs, then two major indexes end down
* Dow falls 0.4 pct; S&P 500 off 0.3 pct; Nasdaq up 0.1 pct (Adds commentary, updates to closing prices, volume)
By Sinead Carew
Sept 17 (Reuters) - Major Wall Street indexes gave up a 1-percent rally to end lower on Thursday after the Federal Reserve cited concerns about global economic growth in its decision to hold off on raising interest rates.
The U.S. central bank held rates steady in a bow to worries about the global economy, financial market volatility and sluggish inflation at home, but it left open the possibility of a modest policy tightening later this year.
The S&P financial index led the decline after being among the top performers throughout the prior five sessions.
The decline in financial stocks, which benefit from higher rates, alongside the rise in utility stocks suggest that investors now believe interest rates will remain low for longer than previously expected.
Investors' focus turned to the next Fed meeting on Oct. 27-28 as they were still left to figure out the timing for the Fed's first benchmark rate increase since 2006.
Trading was extremely choppy after the Fed's 2 p.m. statement, with major U.S. indexes swinging between session highs and lows. The three major U.S. indexes all rose more than 1 percent for a while during Fed Chair Janet Yellen's 2.30 p.m. press conference, but then retreated.
"All the uncertainty that was in the market leading up to this meeting is still in place. There was very little clarity given," said John Culbertson, chief investment officer of Context Asset Management in Philadelphia.
"You're going to hear the same conversation in the markets for the next 30 days that you heard in the last 90 days," he said, citing difficulties making "high-conviction trades."
Questions about when the Fed will shift gears have dogged Wall Street for months - a situation complicated in recent weeks by market turbulence linked to slowing growth in China and worries about the health of the global economy.
"In our minds it was the correct decision. The inflation data does not support a rate hike at this time. You throw in some of the global turbulence and (that) supports the decision to leave rates unchanged," said Brian Rehling, co-head of global fixed income at Wells Fargo in St. Louis.
The Dow Jones industrial average fell 65.21 points, or 0.39 percent, to 16,674.74, the S&P 500 lost 5.11 points, or 0.26 percent, to 1,990.2 and the Nasdaq Composite added 4.71 points, or 0.1 percent, to 4,893.95.
Ahead of the news, U.S. interest rates futures had indicated only a 25-percent chance the central bank would raise rates on Thursday, and 35 of 80 economists polled by Reuters earlier this week expected an increase.
Only four of the 10 major S&P sectors ended higher, with the utility index, up 1.3 percent, having the best day. The financial services index turned negative during Yellen's comments and ended down 1.3 percent while the telecommunications index dropped 1.1 percent.
Trading was heavy with almost 8 billion shares changing hands on U.S. exchanges on Wednesday, in line with the 8.1 billion daily average for the previous 20 trading days, which saw a spike in volume according to Thomson Reuters data.
Advancing issues outnumbered decliners on the NYSE 1,866 to 1,201, for a 1.55-to-1 ratio on the upside; on the Nasdaq, 1,546 issues rose and 1,244 fell for a 1.24-to-1 ratio favoring advancers.
The S&P 500 posted 15 new 52-week highs and 2 lows; the Nasdaq recorded 59 new highs and 31 lows. (Additional reporting by Rory Carroll in San Francisco; Editing by Ted Kerr and Nick Zieminski)