Stocks lost steam in the final hour of trading to finish mixed Thursday, after the Federal Reserve announced new capital rules for financials and following Bernanke's comments that offered little hope for further central bank intervention.
Stocks saw an initial boost at the open after China's central bank cut its key interest rateby 25 basis points in a surprising move, in an aim to bolster its sagging economy. (Read More: Why China’s Interest Rate Cut Is a Really Big Deal)
The Dow Jones Industrial Average came off its triple-digit rally, but still rose 46.17 points, or 0.37 percent, to finish at 12,460.96, led by Caterpillar and United Tech.
The S&P 500 slipped 0.14 points, or 0.01 percent, to end at 1,314.99. The Nasdaq erased 13.70 points, or 0.48 percent, to close at 2,831.02. Still, all three major averages are on pace to logging their biggest weekly gains of 2012.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended below 22.
Among the key S&P sectors, telecoms and techs led the laggards, while utilities held modest gains.
In the final hour of trading, the Federal Reserve announced it wants U.S. banks to set aside more money to cover for unexpected losses, a move aimed at preventing another financial crisis. The news pushed major banks into negative territory, with Morgan Stanley and BofA leading the sector laggards.
Earlier, Bernanke told a congressional panel the central bank is "prepared to take action" if needed to boost the U.S. economy, but made no specific commitment to more easing. The Fed leader also said the economy continues to grow at a moderate pace but faces challenges from the jobs market as well as the debt crisis in Europe.
Bernanke's comments were a buzzkill to investors who had hoped for further policy action on the heels of several disappointing economic reports. On Wednesday, Fed's vice chair Janet Yellen along with several other regional Fed Presidents had made cases for further easing.
Gold slid below $1,600 an ounceafter Bernanke's comments, while the dollar rose.
“In fact, investors should be hoping that [Bernanke] doesn’t have to use QE3—that would indicate that the system is getting back on its feet by itself,” said Lawrence Creatura, portfolio manager at Federated Investors. “QE3 is a temporary salve and we’ve already used it twice—it has provided temporary relief of the symptoms but it does not treat the disease.”
Investors also saw some evidence that European policymakers would act to prop up Spain’s banking sector, sending European shares closed higher, adding to the previous session's sharp rally.
Meanwhile, Fitch cut its rating on Spain's government debt by three notches to 'BBB'and added it could lower it further by putting the country on negative outlook. The new rating was Spain's lowest among the three main ratings agencies.
“The Fitch downgrade pushes Spain to the forefront, which means Europe has got less time and has got to get there and ring-fence the Spanish banks and that’s the hope you’re seeing,” said Art Cashin, director of floor operations at UBS Financial Services on CNBC's "Power Lunch." “Europe has to act and act rapidly before it gets lost to the people in the streets—the ATMs of Athens Madrid—if you get something that resembles a real bank run, then it’s out of their hands.”
Best Buy declined after founder Richard Schulze said he was resigning as chairman and a director and was exploring all optionsfor his 20.1 percent stake in the company.
Among earnings, Lululemon Athletica slumped after the yoga-apparel retailer posted higher quarterly profit, but said same-store sales growth would slow.
Men's Wearhouse plunged after the men's clothing retailer posted quarterly results that missed estimates and projected weak earnings in the upcoming quarter.
Meanwhile, JM Smucker edged higher after the Jif peanut butter maker topped earnings and revenue expectations.
Starbucks said its U.S. stores will begin selling K-cups for Green Mountain's Keurig brewers as early as next week. Rival Dunkin Donuts was slightly lower.
A federal judge ruled that Chesapeake Energy will not need to delay its scheduled annual meeting on Friday to allow shareholders more time to investigate CEO Aubrey McClendon's financial dealings.
Goodyear Tire & Rubber acquired 100 percent ownership of its NipponGiant Tire unit in Japan for an undisclosed amount.
On the economic front, claims for unemployment benefits fell more than expected last weekfor the first time in April, declining 12,000 to a seasonally adjusted 377,000, according to the Labor Department.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
FRIDAY: International trade, wholesale trade, Fed's Kocherlakota speaks, Chesapeake annual meeting
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