Stocks Skid as Bernanke Testifies; Apple Rises

Stocks skidded Wednesday as testimony from Federal Reserve Chairman Ben Bernanke rattled the market.

Stocks had struggled all day as Morgan Stanley and Apple gave the market a boost this morning after smashing earnings expectations but weakness in techs and retailers dragged on the market. Bernanke's comments helped push the market decidely lower.

"The sudden sell-off is a culmination of several weeks of poor economic news, which investors were happy to conveniently ignore while hoping for a wishful earnings season. The Chairman's comments are simply reinforcing what we already knew and helping to provide octane to the beginning of a bear run. Investors should brace themselves that stocks will severely cool down for the remainder of the summer," said Todd M. Schoenberger, managing director of LandColt Trading.

The Dow Jones Industrial Average was down more than 100 points as the Fed chairman spoke.

The S&P 500 and Nasdaqalso took a tumble. The CBOE volatility index, widely considered the best gauge of fear in the market, rose above 25.

The key words that may have done it were "unusually uncertain," which the Fed chairman used to describe the economic outlook.

"Even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain," Bernanke said in pre-prepared remarks. "We remain prepared to take further policy actions as needed to foster a return to full utilization of our nation's productive potential in a context of price stability."

Apparently, that was a little more hawkish than many had expected.

"This statement reads like a Fed chairman way more concerned about draining liquidity as opposed to providing further stimulus. I would argue the market, being unconvinced in the recovery, is taking this as a too-hawkish statement," said Dan Greenhaus, chief economic strategist at Miller Tabak.

Despite the market volatility, some experts told investors that this is a good chance to buy stocks.

"U.S. large cap stocks represent a once in a lifetime opportunity, in my opinion to buy the best quality companies in the world at bargain prices," said Bill Miller, chairman of Legg Mason in a commentary to his clients. "The last time they were this cheap relative to bonds was 1951."

Apple shares jumped almost 3 percent after the iPod maker reported record revenue numbers. At least eight brokerages raised their price targets on the firm, including JPMorgan, which raised its price target on Apple to a whopping $400.

But tech stocks overall were weak, with Yahoo down almost 8 percent after a disappointing earnings report. At least seven brokerages either downgraded their ratings or cut their price targets on the stock amid weak revenue worries.

Results are due out from eBay , Qualcomm and Starbucks after the bell.

Lenovo is planning to launch a tablet PC that uses Google's Android operating system, internally referred to as LePad, to compete with Apple's iPad.

And banks rallied after some solid earnings out of the sector. Morgan Stanley soared more than 8 percent after the bank easily beat estimatesand Wells Fargo jumped after its own strong report.

Another parade of regional banks are also scheduled to report earnings tomorrow: BB&T, Huntington Bank, KeyCorp, Fifth Third, PNC Bank and SunTrust, following today's strong quarterly reports from USBancorp and Comerica.

But Goldman Sachs shares struggled as several brokerages downgraded their full-year forecasts for the bank after revenue disappointedwhen it reported results on Tuesday. KBW raised its rating to "outperform" and its price target to $190 on the stock, but reduced its full-year earnings forecast to $14.80 a share. Four other brokerages also lowered their forecasts.

Shares of Dow component Coca-Cola gained over 1 percent after the company beat earnings estimates with a profit of $1.06 a share.

And former Dow component Altria rose after the company hit its target with earnings of 50 cents a share.

In addition to several regional banks, earnings reports are expected Thursday from AT&T, Caterpillar, 3M, Travelers, UPS,, American Express and Microsoft.

Traders have grown skittish because of weaker-than-expected revenue at some major firms. Investors are focusing on revenue as they believe that companies' sales figures are a good indicator of the overall economy. With the current earnings season in full swing, the results have been mixed, prompting the market to sway erratically over the past few trading sessions.

But some market pros say the results have been decent enough that the potential for a double dip is fading and many are starting to price in expectations of growth.

In the day's economic news, U.S. mortgage applications jumped last week and demand for home refinancing loans hit the highest level in 14 months, according to the Mortgage Bankers Association. The reports provided a glimmer of hope for the struggling housing market since the expiration of homebuyer tax credits.

Still, the positive news didn't help lift the homebuilder stocks as the sector remained weak.

Meanwhile, BP shares rose after the oil giant denied a report that CEO Tony Hayward would soon step down, a day after confirming $7 billion in asset sales to help meet the cost of the Gulf cleanup.

Oil prices slipped to around $77 a barrelafter weekly government data showed a surprise increase in U.S. crude oil stocks.

Gold prices rose above $1,190 an ouncewhile the euro fell against the dollaras tepid demand at a Portuguese debt sale underscored fears about Europe's banks days before the EU was due to reveal which ones need to raise more capital.

Walmart slipped as the world's largest retailer faces a potentially costly class-action lawsuit in Colorado accusing it of trying to limit health care compensation for injured employees.

And the Wall Street Journal reports that AIG has chosen Goldman Sachs and Morgan Stanley to coordinate an IPO for its Asian unit, AIA.

Still to Come:
WEDNESDAY: Earnings from eBay, Qualcomm and Starbucks after the bell
THURSDAY: ECB meeting; weekly jobless claims; Fed's Dudley speaks; existing-home sales; leading indicators; earnings from AT&T, Caterpillar, 3M, Travelers, UPS, BB&T, Fifth Third, KeyCorp, Nokia, PNC Bank, SunTrust, Amazon, American Express, Microsoft and Capital One
FRIDAY: EU bank stress-test results; earnings from Ford, McDonald's and Verizon

More From