Stocks finished lower Thursday for the fourth session in five after Bernanke said the Fed is not prepared to take further action and amid ongoing concerns about the U.S. debt ceiling, erasing earlier gains fueled by encouraging economic news as well as strong earnings from JPMorgan.
The Dow Jones Industrial Average slipped 54.49 points, or 0.44 percent, to end at 12,437.12, led by Alcoa and DuPont.
The S&P 500 declined 8.85 points, or 0.67 percent, to 1,308.87.
The tech-heavy Nasdaq skid 34.25 points, or 1.22 percent, to finish at 2,762.67.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped above 21.
All 10 S&P sectors turned lower, led by industrials and techs.
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. (Read More: Pisani—Traders Have 'Crisis Fatigue')
"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 the previous session following Bernanke's remarks 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. "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 finished lower. 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.”