Stocks Slide Ahead of Close; Energy Gains

Stocks were poised to close lower for the sixth-straight session Wednesday amid concerns over the recovery following Ben Bernanke's grim economic outlook and after the Fed's latest Beige Book stated that several regions showed signs of a slowdown.

The Dow Jones Industrial Average slipped almost 40 points, following a day where stocks finished down for the fifth straight sessionTuesday.

Oil giant ExxonMobil led the blue-chip leaders, while Cisco and Alcoa dragged.

The S&P 500 and the tech-heavy Nasdaq were trading lower. The CBOE Volatility Index, widely considered the best gauge of fear in the market, advanced above 18.

The Dow and the S&P have not closed higher this month and have declined approximately 4 and 4.5 percent, respectively.

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

Growth slowed in some U.S. regionsduring May, due to higher food and energy costs as well as supply disruptions stemming from Japan's earthquake took a toll, according to the Fed's periodic "Beige Book" summary.

This follows a late-session market selloff Tuesday after 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 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 of 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, strategists at Capital Daily said QE3 is unlikely this year and that equities are "likely to struggle"—with the S&P falling to 1,200 by year-end—even if the economy picks up.

Oil prices rallied after OPEC unexpectedly left its production levels unchanged and following a weekly government report that showed crude inventories fell more than expected. U.S. light, sweet crude gained $1.65 to settle at $100.74 a barrel. London Brent Crude gained $1.07 to settle at $117.85 a barrel.

ExxonMobil gained after the Dow component said it made several major oil and natural gas discoveries in the deepwater Gulf of Mexico.

Meanwhile, the Senate voted to let the Fed limit the fees that stores pay banks each time a consumer uses their debit card, marking a victory for retailers. Shares of Visa and MasterCard remained lower following the news.

Among financials, Citigroup slipped after the firm agreed to sell a portfolio of private equity assets to AXA Private Equity for $1.7 billion.

Meanwhile, banks including Goldman Sachs , Bank of America , JPMorgan and Morgan Stanley are among companies considering layoffs as they struggle to rein in costs and produce profits in a weak market. Financials have been the poorest performer in 2011.

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

Semiconductors dragged techs lower with Micron , Broadcom and Texas Instruments trading lower. Meanwhile, TI is slated to post its mid-quarter update after-the-bell.

And Ciena plunged more than 15 percent after the communication equipment maker posted a 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 declined 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.

Target announced an increase in its regular quarterly dividend by 20 percent during its annual shareholders meeting.

Among other retailers, Gap sagged more than 2 percent after Barclays downgraded clothing chain to "equal weight" from "overweight" and cut its price target to $17 from $22. Abercrombie & Fitch also slumped after the teen apparel retailer's CFO said its results won't be as robust as the previous quarter.

Meanwhile, Lululemon advanced after ISI Group initiated the firm with a "buy" rating.

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

The dollar rose against most currencies, while gold fell $5.30, or 0.3 percent, to settle at $1,538.70 an ounce.

Treasury prices trimmed gainsafter the government auctioned $21 billion in 10-year notes, which had a high yield of 2.967 percent and a bid-to-cover of 3.23. On Thursday, the government is scheduled to auction $13 billion in 30-year bonds.

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:

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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