Stocks Zig-Zag; Energy Rises, Techs Slip

Stocks fluctuated in a narrow range Wednesday as energy climbed after OPEC failed to reach an agreement on hiking oil production, but gains were limited after Fed chairman Bernanke's grim outlook of the economy.

The Dow Jones Industrial Average bobbed in and out of positive territory, after shaving all of the session's gains in the last hour of trading to finish down for the fifth straight dayTuesday.

Energy giants ExxonMobil and Chevron were among the blue-chip leaders, while DuPont slipped.

The S&P 500 and the tech-heavy Nasdaq were trading mixed. The CBOE Volatility Index, widely considered the best gauge of fear in the market, was little changed around 18.

Among the key S&P sectors, materials and techs sagged, while energy advanced.

Speaking at a banking conference in Atlanta on Tuesday, Bernanke said the U.S. economy had suffered a "loss of momentum" but that he still expected growth to pick up again, making a third round of quantitative easing unnecessary. Bernanke’s comments helped accelerate a late-session selloff on Wednesday.

Bernanke’s cautious tone that the economy is well-below its potential is worrying investors, according to Scott Brown, chief economist at Raymond James.

“There’s belief that there’s a temporary slow patch and things are still going to be far below our potential and as such, the Fed’s going to be accommodative for now,” said Brown.

Brown said he expects a “long summer” ahead for the market, but long-term prospects are “still looking strong” for investors who are willing to be patient.

Meanwhile, government officials and investors described the suggestion to allow a small U.S. debt default to force government spending cutsas a "horrible idea" which could destabilize the world economy and sour already tense relations with big creditors like China.

Oil prices turned higher after OPEC unexpectedly left its production levels unchanged and after a weekly government report showed crude inventories fell more than expected. U.S. light, sweet crude gained to near $101 a barrel while London Brent Crude was trading around $118. The next OPEC meeting is scheduled to take place in December.

ExxonMobil gained after the Dow component said it made two new oil discoveries in addition at a natural gas find in the deepwater Gulf of Mexico.

Citigroup agreed to sell a portfolio of private equity assets to AXA Private Equity for $1.7 billion, in an attempt by the banking giant to unload non-core assets.

Meanwhile, banks including Goldman Sachs , Bank of America , JPMorgan and Morgan Stanley are among those that are considering layoffs as they struggle to rein in costs and produce profits in a weak market, according to the New York Post. The financial sector has been the poorest performer in 2011.

Later this afternoon, the senate is expected to vote over whether to block the Fed from capping fees that stores pay banks everytime a consumer uses a debit card. Shares of Visa and MasterCard traded lower ahead of the vote.

Among tech stocks, Cisco declined after Berenberg Bank cut its price target on the tech bellwether to $14 from $16.50.

Semiconductors dragged the sector lower with Micron , Broadcom and Texas Instruments trading lower.

And Ciena plunged more than 10 percent after the communication equipment maker posted a quarterly loss and forecast revenue below expectations.

Verizon edged higher after Oppenheimer upgraded the telecom giant to "outperform," saying the sector is expected to benefit from cloud computing. Meanwhile, rival AT&T slipped.

McDonald's slipped after the fast-food giant reported an increase in May same-store sales, but the gains were more modest than expected in the U.S.

BJ's Wholesale gained following news that private equity firms Leonard Green and CVC Capital could make a joint buyout offer for the grocery store chain, valuing the company at about $2.8 billion, according to the New York Post.

Drugmaker Merck said it will discontinue a major trial of a key vaccine from Intercelldesigned to protect against serious hospital infections.

In earnings news, Hovnanian also declined after the homebuilder said losses more than doubled after the firm sold fewer homes.

The government is slated to auction $21 billion in 10-year notes at 1pm ET.

Meanwhile, the Federal Reserve will issue the Beige Book, a summary of economic conditions in the 12 Federal Reserve districts, at 2:00 pm ET.

On the economic front, weekly mortgage applications eased in the previous week, although demand for refinancing improved as interest rates edged down, according to the Mortgage Bankers Association.

European shares closed lowerfor a sixth session to a 11-week low, with sentiment rattled by a bearish assessment of the economy from Bernanke.

Coming Up This Week:

WEDNESDAY: 10-year Treasury note auction, Fed's Beige Book; Fed's Hoenig speaks
THURSDAY: Bank of England announcement, European Central Bank announcement; international trade, jobless claims, wholesale trade, 30-year Treasury bond auction, money supply; Lubrizol shareholders vote on Berkshire takeover; Fed's Plosser speaks, Fed's Yellen speaks; earnings from National Semiconductor.
FRIDAY: Import & export prices, Treasury budget; earnings from Lululemon Athletica.

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