Stocks came off their session highs Thursday after news Bernanke said the Federal Reserve is not prepared to take further action on the economy, but were still buoyed from positive economic news as well as stronger-than-expected earnings results from bank titan JPMorgan.
The Dow Jones Industrial Average pared back but continued to hold onto modst gains, led by JPMorgan and McDonald's after snapping a three-day losing streak in the previous session.
Alcoa was the biggest laggard on the blue-chip index.
The S&P 500 and the tech-heavy Nasdaq turned lower. The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded above 20.
Utilities and energy were the biggest gainers among key S&P sectors, while materials slipped.
Fed Chairman Ben Bernanke's comments appeared to shut the door on any near-term possibilities of another round of bond buying, giving a boost to the dollar.
"The situation is more complex," Bernanke told the Senate Banking Committee. "Inflation is higher...We are uncertain about the near-term developments in the economy. We would live to see if the economy does pick up. We are not prepared at this point to take further action."
Stocks had gained in recent days following Bernanke's statements that implied the Fed may be preparing for another round of Treasury bond buying.
“I don’t think even QE2 was effective as the Fed estimated," Joe Lavorgna, chief economist for Deutsche Bank Global Markets. "They’re really downplaying the big commodity move we had, the weak dollar and the fact that headline inflation rose quite dramatically in the first half of the year really crimping household incomes—so I hope they don’t do QE3 as I think it may do more harm than good at this point.”
JPMorgan led the Dow gainers after the banking giant reported better-than-expected earnings as the absence of a British tax on bonuses helped improve their bottom line. Rivals BofA , Citigroup and Goldman Sachs were also higher. Citigroup is slated to report on Friday.
However, some traders remained skeptical on the banking sector.
“I think you need to wait for more information,” Dan Fitzpatrick, trader and senior contributor to RealMoney.com told CNBC. “One great earnings from JPM does not meant that financials have bottomed.”
On the economic front, weekly jobless claims dropped 22,000 last week to a seasonally adjusted 405,000, the lowest level in almost three months, according to the Labor Department. Economists had expected jobless claims to fall to 415,000.
“We’re getting close to the 400,000 mark—if we can get down to the 35,000 to 37,000 area again, that sets the idea that we have a better jobs environment,” said Steve Rick, Sr. Economist at CUNA. “We’re heading in that direction, but not there yet.”
Rick said today’s encouraging data supports his expectation that the economy may see a rebound in the second half.