* Fed keeps rates steady, closely watching global markets
* Apple, Boeing drop after forecasts miss estimates
* Dow down 1.38 pct, S&P down 1.09 pct, Nasdaq down 2.18 pct (Updates to close)
By Noel Randewich
Jan 27 (Reuters) - Wall Street dropped sharply on Wednesday after the U.S. Federal Reserve frustrated stock investors hoping for a strong sign it might scale back future interest rate hikes because of recent financial and economic turmoil.
In a widely expected decision, the Fed kept interest rates unchanged and it said it was "closely monitoring" global economic and financial developments, but it maintained an otherwise upbeat view of the U.S. economy.
With plummeting oil prices and fears of slower economic growth in China sending the S&P 500 down 8 percent in 2016, investors saw the Fed's conciliatory comments as a step in the right direction.
But some on Wall Street had hoped an even stronger indication that policymakers might scale back the pace of future interest rate hikes.
"It sounds like they are unimpressed with what has happened in the markets, that it has been insufficient to change their plans. That's the takeaway and it's why the market is going down," said Stephen Massocca, Chief Investment Officer of Wedbush Equity Management LLC in San Francisco.
That was enough to reverse earlier gains driven by a jump in crude prices after Russia said it was discussing the possibility of cooperation with OPEC and U.S. data showed an increase in short-term demand.
With fourth-quarter corporate reports pouring in, earnings of S&P 500 companies on average are expected to drop 4.9 percent, according to Thomson Reuters data. Excluding energy, earnings are expected to grow 1.3 percent.
The Dow Jones industrial average ended down 1.38 percent at 15,944.32 points while the S&P 500 lost 20.68 1.09 percent to 1,882.95. The Nasdaq Composite dropped 2.18 percent to 4,468.17.
Eight of the 10 major S&P sectors fell, led by the tech sector's 2.46-percent descent.
Apple's shares fell 6.57 percent after the iPhone maker reported its slowest-ever rise in shipments on Tuesday, while Boeing lost 8.9 percent, its biggest fall since August 2011.
Textron slid 13.36 percent while Tupperware sank 14.8 percent. Both companies' revenue missed estimates.
A weaker-than-expected 2016 forecast helped push VMware shares down 9.82 percent.
Among the few gainers, Biogen rose 5.15 percent after its profit and revenue beat expectations.
After the bell, Facebook posted fourth-quarter revenue above expectations and its stock rose 4.7 percent.
Declining issues outnumbered advancing ones on the NYSE by 1,900 to 1,145. On the Nasdaq, 1,943 issues fell and 816 rose.
The S&P 500 index showed three new 52-week high and seven new lows, while the Nasdaq recorded 10 new highs and 89 lows.
About 8.8 billion shares changed hands on U.S. exchanges, below the 8.5 billion daily average for the past 20 trading days, according to Thomson Reuters data. (Reporting by Abhiram Nandakumar in Bengaluru; Editing by Anil D'Silva and Nick Zieminski)