Stocks finished lower for the sixth-consecutive session Wednesday as investors worried over a slowing recovery following Ben Bernanke's grim outlook and after the Fed's latest Beige Book, which showed signs of a slowdown in several regions.
The Dow Jones Industrial Average fell 21.87 points, or 0.18 percent, to finish at 12048.94.
Cisco and Alcoa were the biggest laggards on the blue-chip index.
The S&P 500 slipped 5.38 points, or 0.42 percent, to end at 1279.56.
The Dow and the S&P have yet to close higher in June, declining approximately 4 and 5 percent, respectively.
The tech-heavy Nasdaq tumbled 26.18 points, or 0.97 percent, to close at 2675.38.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, gained almost 4 percent to close at 18.79.
Among the key S&P sectors, materials and banks sagged, while energy advanced.
Growth slowed in some U.S. regionsduring May, due to higher food and energy costs as well as supply disruptions stemming from Japan's earthquake took a toll, according to the Fed's periodic "Beige Book" summary.
This follows a late-session market selloff Tuesday after Bernanke said the U.S. economy had suffered a "loss of momentum"but that he still expected growth to pick up again, making a third round of quantitative easing unnecessary. (Read More: Don't Blame Bernanke for Market Drop)
Bernanke’s cautious tone is worrying investors, according to Scott Brown, chief economist at Raymond James.
“There’s belief of a temporary slow patch and things are still going to be far below our potential and as such, the Fed’s going to be accommodative for now,” said Brown.
Brown expects a “long summer” ahead for the market, but long-term prospects are “still looking strong” for investors who are willing to be patient.
Meanwhile, strategists at Capital Daily said QE3 is unlikely this year and that equities are "likely to struggle"—with the S&P falling to 1,200 by year-end—even if the economy picks up.
Oil prices rallied after OPEC unexpectedly left its production levels unchanged and following a weekly government report that showed crude inventories fell more than expected. U.S. light, sweet crude gained $1.65 to settle at $100.74 a barrel. London Brent Crude gained $1.07 to settle at $117.85 a barrel.
ExxonMobil gained after the Dow component said it made several major oil and natural gas discoveries in the deepwater Gulf of Mexico.
Meanwhile, the Senate voted to let the Fed limit the fees that stores pay bankseach time a consumer uses their debit card, marking a victory for retailers. Shares of Visa and MasterCard tumbled following the news, but ended off their lows.
Among financials, Citigroup slipped after the firm
Meanwhile, banks including Goldman Sachs , Bank of America , JPMorgan and Morgan Stanley are among companies considering layoffs as they struggle to rein in costs and produce profits in a weak market. Financials have been the poorest performer in 2011.
On the tech front, Cisco declined after Berenberg Bank cut its price target on the tech bellwether to $14 from $16.50.
Semiconductors dragged techs lower with Micron , Broadcom and Texas Instruments trading lower. Meanwhile, TI is slated to post its mid-quarter update after-the-bell.
And Ciena plunged more than 15 percent after the communication equipment maker posted a loss and forecast revenue below expectations.
Verizon edged higher after Oppenheimer upgraded the telecom giant to "outperform," saying the sector is expected to benefit from cloud computing.
McDonald's declined after the fast-food giant reported an increase in May same-store sales, but the gains were more modest than expected in the U.S.
BJ's Wholesale gained following news that private equity firms Leonard Green and CVC Capital could make a joint buyout offer for the grocery store chain, valuing the company at about $2.8 billion.
Target shares were lower even after the retail giant announced a 20 percent quarterly dividend increase during its annual shareholders meeting.
Among other retailers, Gap sagged after Barclays downgraded clothing chain to "equal weight" from "overweight" and cut its price target to $17 from $22. Abercrombie & Fitch also slumped after the teen apparel retailer's CFO said the firm's results won't be as robust as the previous quarter.
Meanwhile, Lululemon advanced after ISI Group initiated the firm with a "buy" rating.
In earnings news, Hovnanian tumbled more than 10 percent after the homebuilder said losses more than doubled after the firm sold fewer homes.
The dollar rose against most currencies, while gold fell $5.30, or 0.3 percent, to settle at $1,538.70 an ounce.
Treasury prices trimmed gainsafter the government auctioned $21 billion in 10-year notes, which had a high yield of 2.967 percent and a bid-to-cover of 3.23. On Thursday, the government is scheduled to auction $13 billion in 30-year bonds.
Volume on the consolidated tape of the NYSE was 3.90 billion shares, while 1.01 billion shares changed hands on the floor.
On the economic front, weekly mortgage applications eased in the previous week, although demand for refinancing improved as interest rates edged down, according to the Mortgage Bankers Association.
European shares closed lowerfor a sixth session to a 11-week low, with sentiment rattled by a bearish assessment of the economy from Bernanke.
Coming Up This Week:
THURSDAY: Bank of England announcement, European Central Bank announcement; international trade, jobless claims, wholesale trade, 30-year Treasury bond auction, money supply; Lubrizol shareholders vote on Berkshire takeover; Fed's Plosser speaks, Fed's Yellen speaks; earnings from National Semiconductor.
FRIDAY: Import & export prices, Treasury budget; earnings from Lululemon Athletica.
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