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Stocks Fall as Oil Prices Rise; Banks Skid

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.

General Motors pared losses after reporting a 49 percent jump in February auto sales, which was more than expected. The automaker was the first of the majors to report sales. Rivals Ford Motor also traded lower ahead of releasing sales figures, while Toyota and Nissan gained.

Overall, U.S. auto sales were expected to show a gain of about 20 percent from the depressed levels of a year earlier in February.

Financial stocks led decliners. JPMorgan slumped after news its legal losses could total up to $4.5 billion, more than it has in its litigation reserves. Also, Bank of America and mortgage-backed securities investors were continuing to talk about how investors could recoup losses on failed loans, the Wall Street Journal reported.

Shares of J. Crew Group rose after shareholders approved a $3 billion buyout by private equity holders TPG Capital and Leonard Green & Partners.

AutoZone gained after reporting a 20 percent boost in fiscal second-quarter earnings.

Fresh Del Monte sank after disappointing fourth-quarter results as the produce distributor suffered from write-downs on some banana plantations.

And Las Vegas Sands fell after news the casino operator is being investigated by the Securities and Exchange Commission and the Department of Justice.

In economic news, the Institute for Supply Manufacturer's Indexrose to 61.4 in February, which was slightly more than expected, and the highest level in seven years. The index was 60.8 in January. The prices paid index within the report rose slightly to 82.0 from 81.5 in January, and the employment index rose to 64.5 in February from 61.7 a month earlier.

Meanwhile, however, construction spending fell 0.7 percent to an annual rate of $791.82 billion, its lowest level in five months, according to the Commerce Department.

Figures released in Europe Tuesday morning showed inflation was on the rise in the 17 countries that share the euro. Euro zone inflation rose to 2.4 percent in February, its highest level since October 2008.

On Tap Next Week:

TUESDAY: Auto sales
WEDNESDAY: Mortgage applications, Challenger job-cut report, ADP employment report, oil inventories, Federal Reserve's Beige Book; Atlanta Fed President Lockhart speaks; earnings before-the-bell from BJ's, Costco and Staples.
THURSDAY: Chain store sales, ECB announcement, Monster employment index, jobless claims, productivity and costs, ISM non-manufacturing index, natural gas inventories, money supply; Minneapolis Fed President Kocherlakota speaks, Atlanta Fed President Lockhart speaks; earnings before-the-bell from Heinz, Kroger; earnings-after-the-bell from Novell.
FRIDAY: Non-farm payrolls report, factory orders; Federal Budget Deadline.

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