Stocks declined Tuesday as investors digested a slew of Fed statements. Disappointing comments from Home Depot and a rebound in the dollar weighed on the market.
The dollar bounced backfrom a 15-month low on Monday after rare comments from Fed Chairman Ben Bernanke on the dollar. Bernanke said the central bank was ""attentive to implications of changes in the value of the dollar," but reaffirmed that the Fed planned to keep rates low for an "extended period."
Speaking in Hong Kong, San Francisco Fed President Janet Yellen said setting interest rates can play a role in averting crises, but whether they should be set in response to asset prices is still an open question. Those remarks echoed similar comments from Bernanke yesterday.
Richmond Fed President Jeffrey Lacker said a recovery is "solidly" underway and he expects the economy to grow at a "reasonable pace" next year. But he also made remarks that may be seen as a signal of Fed tightening, saying pockets of sluggishness in the economy should not prevent the Fed from beginning to unwind its extraordinary level of support.
"If we hope to keep inflation in check, we cannot be paralyzed by patches of lingering weakness, which could persist well into the recovery," Richmond Federal Reserve Bank President Jeffrey Lacker said in a speech to members of the Virginia House of Delegates.
The Dow briefly turned positive after Lacker's remarks before dropping to new lows for the day.
Just a few minutes later, the Fed announced plans to cut the maturity on discount-window loans to 28 days from 90 days amid signs of improvement in financial markets. The Fed had extended the timeframe when the financial crisis first hit in August 2007.
Still to come: Cleveland Fed President Sandra Pianalto has an appearance at the Ohio Housing Conference at 12:55 pm.
As for the day's data points: Producer prices rose 0.3 percentin October, with the core rate dropping 0.6 percent. Economists were looking for an increase of 0.5 percent and a drop of 0.1 percent, respectively.
And industrial production climbed 0.1 percentlast month, less than the 0.4-percent gain expected.
Retailers grabbed investors' attention in early trading.
Home Depot was the biggest decliner on the Dow in the morning session after the home-improvement chain beat earnings expectations and raised its full-year outlook but said its markets remain under pressure.
Caterpillar and American Express rounded out the Dow's bottom three.
Target reported its earnings rose 18 percent, snapping eight quarters of decline, but was also cautious on the fourth quarter, sending its shares lower.
After the bell, earnings reports are due from Autodesk and Salesforce.com.