Stocks pared losses as Federal Reserve Chairman Ben Bernanke spoke before the Senate Banking Committee, and as oil prices continued to surge.
TheDow Jones Industrial Averagefell more than 45 points, a day after the blue-chip index had closed higher for a third straight month.
Among Dow components, Alcoa , Verizon , and General Electricfell, while Coca-Cola rose.
The S&P 500 and the Nasdaq both fell. Both indices had also posted posting three consecutive months of gains. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to nearly 18.
Bernanke said gains in oil prices were unlikely to roil the U.S. economy, although if oil prices remain high, that could stall growth and boost inflation. While Bernanke remains concerned about slow job growth, he sees signs of strength in the U.S. economy.
While Bernanke said he is no longer concerned deflation will hurt the economy, he expects inflation to remain low.
Three Fed officials have questioned the Fed's quantitative easing programin the past several days.
After pausing Monday, oil prices rose Tuesday amid clashes between security forces and protesters in Iran, and amid unfounded rumors that Saudi Arabia had sent tanks to Bahrain to quell unrest. A government spokesman in Bahrain said the tanks "were Bahraini tanks returning from Kuwait National Day celebrations, where military from several Allied countries participated in an event commemorating Kuwait’s liberation in 1991.”
London Brent rose above $112 a barrel, while U.S. light sweet crude soared above $98.
Precious metals also rose on the unrest in the Middle East, as gold climbed above $1,320an ounce, and silver rose above $34 an ounce.
Also in economic news, Treasury Secretary Timothy Geithner was addressing the House Financial Services Committee Tuesday morning.
Geithner was expected to say Congress should pass legislation overhauling the U.S. housing finance system within two years, though it should not act in haste, as this would be counterproductive.