Stocks regained some ground in the last few minutes of a volatile session, but closed lower as traders continued to consider the Federal Reserve's plans to lift the U.S. economy.
The Dow Jones Industrial Average fell 22.86 points, or 0.2 percent, to 10,835.28.
Dupont, American Express and JPMorgan , fell. Hewlett-Packard, Boeing, and IBM rose.
The S&P 500 fell 2.97 points, or 0.3 percent, to 1,144.73 and the Nasdaq fell 3.03 points, or 0.1 percent, to 2,376.56. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 23.
Materials, financials, and consumer discretionary sectors fell, while energy rose.
Federal Reserve Bank of Boston President Eric Rosengren said Wednesday that the economy is growing too slowly to help reduce unemployment or stop disinflationary pressures, but he didn't detail specific actions.
Earlier Minneapolis Fed President Narayana Kocherlakota said that any move by the Fed to boost the economy through Treasury purchases would have a more "muted" effect than earlier efforts.Kocherlakota was speaking at the European Economics and Financial Centre in London.
And Philadelphia Fed President Charles Plosser, a non-voting member, said despite a slowing economic recovery, further Fed financial easing is unnecessary.
Increasing speculation that the Fed will begin quantitative easing pressured banks Wednesday, which were among the weakest performing sectors.
That's because Fed purchases of intermediate-term Treasury securities will flatten the yield curve between two-year-notes and 30-year bonds, making it more difficult for commercial banks to make a profit, said Jeffrey Kleintop, chief market strategist at LPL Financial.
Most large financials were lower, including JPMorgan , Bank of America and Wells Fargo .
Banks tend to buy short-term debt and lend long-term, so as the margin between short and long-term yields flattens, "their profit margin narrows," Kleintop said.
Commodity stocks, including cotton, copper and corn, as well as gold, meanwhile, should do better, as should energy, materials, and industrials, on the theory the Fed is looking for inflation to rise, Kleintop said.
Meanwhile, Liberty Mutual has delayed the initial public offering of Liberty Mutual Agency, its property and casualty insurance arm, citing the sluggish economy and volatile stock market. The expected $1.22 billion IPO would have been the largest in the United States this year.
Shares of American International Group were higher following news the U.S. government has nearly finalized a plan to sell its stakein the company.
The Treasury Department said it plans to sell some of the $2.2 billion in trust preferred securities it received from Citigroup in January 2009.
Hewlett-Packard rose after it forecast better-than-expected fiscal 2011 revenue and earningsat its annual analysts conference on Tuesday. The tech giant did not, however, name a chief executive to succeed Mark Hurd.
Jabil Circuitadvancedafter Needham Research raised the electronics-component maker to a "strong buy" from "buy." Jabil had slumped Tuesday after forecasting a lower-than-expected revenue target for the first quarter.
Chipmakers also gained, including SanDisk, AMD and Micron.
Amazon.com fell despite a ratings upgrade from Barclays to "overweight," saying the Internet retailer will sell more than 5 million Kindles this year. Barclays also raised the Internet retailer's price target to $180 from $132.
Kohl's shares were flat after the department store chain said it is creating 4,000 jobs as it opens 21 U.S. stores and a new customer service centerthis fall.
On the earnings front, shares of Family Dollar rose after the discount retailer reported a 23 percent rise in fourth-quarter profit, beating Wall Street estimates. The company also said it could beat analyst estimates for the fiscal year.
Energy stocks rebounded after the Energy Information Administration reported crude inventories fell by 475,000 barrels last week, more than expected. Oil prices rose after the news to trade above $77 a barrel.
BP gained after incoming Chief Executive Bob Dudley said he would restructure the oil giant's upstream business and create a new safety division, with the power to audit any part of the company's operations.
Oil drillers were mostly higher across the board, including Diamond Offshore and Transocean , both up more than 3 percent each.
Anadarko Petroleum and Chesapeake climbed after MKM Partners started coverage of the firms with "neutral" and "buy" ratings, respectively.
Meanwhile, Ahmar Zaman, solar analyst at Piper Jaffray, said on CNBC that this is a "great time" for investors to get into the solar sector. Zaman said demand for solar will grow more than 100 percent in 2010, and will continue through 2011.
Zaman's favorite solar stocks include First Solar, Renesola, LDK Solar and Satcon Technologies.
FedEx shares were slightly lower after the company said its Express business was on track to produce double-digit margins.
Green Mountain Coffee plunged after the company said the U.S. Securities and Exchange Commission are looking into the company's revenue recognition practices and its relationship with a 'fulfillment' vendor.
Carnival rose slightly after Goldman Sachs raised the cruise line's rating to "buy" from "neutral," and boosted its price target to $44 from $36, saying the company's margins will improve from cost cuts and low supply growth.
Live Nation Entertainment rose slightly after news that media mogul Barry Diller said he would resign as chairman, according to reports.
A day after its shares tumbled, Monsanto rose after Deutche Bank issued a "buy" rating for the stock, although it cut the seed-maker's price target to $65 from $70.
Volume on the consolidated New York Stock Exchange was about 4 billion shares. On the NYSE floor, volume was about 1 billion shares, with advancers outpacing decliners about 4 to 3.