Stocks End Lower as Financials Drag

Stocks ended lower Wednesday as energy and financials dragged. Consumer discretionary and industrials were among the best performers.

Traders were encouraged by comments from Fed Chairman Ben Bernanke, the Fed's beige-book report and Chinese export data but worries about the BP oil spill and Europe's debt crisis dented confidence.

The Dow Jones Industrial Average shed more than 40 points, or 0.4 percent, after earlier popping above the key 10,000 mark.

The S&P 500and Nasdaq finished down 0.5 percent or more. The CBOE volatility index, widely considered the best gauge of fear in the market, ticked up to 34 after being down near 30 earlier.

The Fed chairman said the recovery appears to be on solid footing but warn that it could take years before the job market gets back to normal.

"Although the support to economic growth from fiscal policy is likely to diminish in the coming year, the incoming data suggest that gains in private final demand will sustain the demand in economic recovery,'' Bernanke told the House Budget Committee.

This came after a report showed Chinese exports grew about 50 percent from a year earlier, which helped to assuage concerns about a double-dip recession and refueled investors' appetite for risk.

Meanwhile, the Fed said U.S. economic activity continued to improve modestly nationwide last month, but worries about Europe's debt crisis dented confidence, according to the Beige Book collection of anecdotal reports.

This lends support to the Fed's pledge to keep its benchmark interest rate low for an extended period. The Fed will use this report at its next policy-setting meeting later this month, and is widely expected to leave rates unchanged near zero.

BP's market cap has now been cut in half, finishing around 94 billion after being at nearly 190 billion just two months ago.

Caterpillar shares rose after the board of directors voted to raise the firm's quarterly dividendto 44 cents from 42 cents, ahead of the company's annual shareholders meeting this afternoon.

Texas Instruments slipped after an earlier pop as the chip maker said second-quarter earnings and revenues would be at the high end of previous forecasts.

Ciena ended higher after the company said its loss was narrower than expected and that customer spending was improving.

But most other chip makers ended lower after Intel was downgraded to "neutral" on Tuesday by SIG Susquehanna, which cited a weakening PC market.

Sprint Nextel said it had inadvertently overstated the launch day sales of the much anticipated EVO 4G phone from HTC, which is touted as a serious competitor to Apple's iPhone 4.

Meanwhile, the euro rose above $1.20 against the dollar, sending energy prices higher: Oil topped $73 a barrel. But gold fell more than $10, trading below $1,235 an ounce.

Treasurys steadied at lower levelsafter a moderate auction of 10-year notes. The $21 billion sale fetched a high yield of 3.242 percent and the bid-to-cover ratio was 3.24.

Auctions of 30-year bonds are expected on Thursday.

In the day's economic news, wholesale inventories rose 0.4 percentin April, while sales rose 0.7 percent.

Banks and homebuilders skidded after a report showed mortgage applications fell to a 13-year low last week.

But Citigroup gained 4 percent as the S&P 500 was set for after the closing bell to account for additional shares the government sold to the public, causing indexes tied to the index to have to buy shares.

Shares of Pulte and D.R. Horton were raised to "hold" from "sell" buy Stifel Nicolaus but the stocks ended lower.

Pall shares jumped 9 percent, making it one of the top gainers on the S&P 500, after the diversified manufacturer posted a 57 percent rise in profit on Tuesday, as demand for its filters recovered.

In health care,Regeneron Pharmaceuticals said a second late-stage study of its experimental gout drug failed to alleviate pain, even though a late-stage study met the trial goal of preventing gout attacks.

In an ongoing dispute, CVS said it will remove Walgreen from its pharmacy benefits management network in retaliation for Walgreen's decision to stop filling prescriptions for new CVS Caremark business. Shares of the two drugstores fell.

Eclipsys shares gained following news that it will be bought by Allscripts-Misys Healthcare Soluctions in a $1.3 billion all-share deal.

And Cardinal Health shares rose after the drug wholesaler said it will buy privately held Healthcare Solutions for more than $500 million.

Volume was higher than usual, with about 1.7 billion shares changing hands on the New York Stock Exchange. Advancers edged past decliners, roughly 16 to 15.

Still to Come:

THURDSAY: International trade; weekly jobless claims; quarterly services survey; 30-yr bond auction; Treasury budget; Earnings from: Del Monte Foods, National Semiconductor
FRIDAY: Fed's Plosser and Kockerlakota speak; retail sales; consumer sentiment; business inventories; S&P index rebalancing details announced

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