Stocks Decline More Than 1% Before Close

Stocks tumbled more than 1 percent in the first trading day of March after Fed Chairman Ben Bernanke's speech before the Senate Banking Committee and as investors worried that rising oil prices could stifle the recovery.

TheDow Jones Industrial Averagesank more than 155 points, as most Dow components tumbled, a day after the blue-chip index had closed higher for a third straight month.

Alcoa and Genreal Electric led the laggards, while Coca-Cola was among the few gainers.

The S&P 500 fell nearly 1.5 percent, to about 1,308, while the tech-heavy Nasdaq fell more than 1.5 percent. Both indices had also posted posting three consecutive months of gains through the end of February. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose more than 10 percent to more than 20.

All key S&P 500 sectors declined, led by 2 percent declines in materials, industrials and financials.

Stocks started the session on an upbeat note, giving traders the sense the market would repeat its seven-month trend of rising on the first trading day of the month. But all the major indices began turning negative shortly after Bernanke began speaking before Congress.

In testimony, 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. The Fed chairman said he is no longer concerned deflation will hurt the economy, but that he expects inflation to remain low.

"He is really talking out of both sides of his mouth," said Kenneth Polcari, managing director at ICAP Equities, noting that he is saying the economy is getting stronger on the one hand, but that it's fragile on the other.

"It’s a very mixed message," Polcari said. "The market is confused."

The market also continues to be nervous because of the unrest in Middle East, and its effect on oil prices, he added.

Oil prices rose as 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 3.2 percent to close above $115 a barrel, while U.S. light sweet crude closed 2.7 percent higher, above $99.

Precious metals also rose on the unrest in the Middle East, as gold climbed to close above $1,430an ounce, a new record, while silver rose above $34 an ounce. Meanwhile, the dollarfell to a 3-1/2-month low against major currencies.

Bernanke's comments may have triggered the sell-off, but Dan Cook, CEO at IG Markets, said the Fed Chairman didn't really say anything surprising. "I don’t think anything he said today would cause a massive correction," Cook said. Instead, "it looked like a good place to take some profits," he said. "People are still questioning the height of equities."

Automakers remained lower even after reporting robust monthly auto sales figures. Sales at General Motors soared 49 percent in February, while sales at Ford rose 12.6 percent. Rival Toyota was slated to post results later this afternoon.

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 the decliners after JPMorgan slumped following 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.

Goldman Sachs slipped after news a former board member wasaccused by the SECof providing inside information about the investment bank to Galleon hedge fund founder Raj Rajaratnam.

Shares of JCrew Group rose after shareholders approveda $3 billion buyout by private equity holders TPG Capital and Leonard Green & Partners.

AutoZone gained after reporting a 20 percent boost in earnings. Meanwhile, Fresh Del Monte fell after disappointing fourth-quarter results as the produce distributor suffered from write-downs on some banana plantations.

And Las Vegas Sands dropped after news the casino operator is being investigated by the SEC and the Department of Justice.

In tech news, Apple fell ahead of a special event Wednesday, where the maker of iPods and iPhones is expected to announce the latest version of the iPad. (Read more: Will Steve Jobs Attend Apple iPod Event?)

And Tivo tumbled ahead of its earnings report, expected after the market closes. Caris downgraded the maker of digital video recorders to "above average" from "buy," and cut its price target to $13 a share from $17.

Meanwhile, Treasury Secretary Timothy Geithner addressed the House Financial Services Committee, saying the Obama administration wants Congress to approve legislation within two years that overhauls Fannie Mae and Freddie Mac, the nation's huge but financially feeble housing market giants.

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. And 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.

On Wednesday, Bernanke will continue his testimony before Congress, speaking before the House Financial Services Committee beginning at 10 a.m. The ADP Employment Report on the private sector was also expected to be released on Wednesday, and the Fed will release its Beige Book of regional economic activity.

European stocks ended lowerafter fresh jitters over political turmoil in the Middle East and North Africa prompted some investors to cash in recent strong gains on banking and energy stocks.

On Tap Next Week:

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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