Bernanke's Talk Proves Costly

Updated from 2:57 p.m. EDT

Ben Bernanke attempted to clarify last week's Federal Open Market Committee statement in his testimony to the Joint Economic Committee Wednesday. But the market wasn't wooed by his words. If anything, traders now know that the Fed shares their uncertainty about the economy's future.

The Dow Jones Industrial Average plunged as the testimony headlines ran at 10:30 a.m. EDT, but Bernanke was by no means alone in Wednesday's market psyche. Stocks staged a weak open on news of heightened political tensions with Iran and a spike in oil prices, news of an investigation into Beazer Homes(BZH Quote), and a soft report of business spending.

After trading as low as 12,257.42 intraday, the Dow finished the day down 96 points, or 0.8% to close at 12,299.15. The S&P 500 closed the day down 0.9% at 1417.16, and the Nasdaq Composite slid 0.8% to close at 2417.10.

The cyclically sensitive parts of the market underperformed Wednesday. The Dow Jones Transportation Average fell 1.2%, while retailers Wal-Mart(WMT Quote) and J.C. Penney(JCP Quote) fell 1.9% and 1.7%, respectively.

Homebuilder Beazer plunged 8.4%, but finished off its intraday lows, amid revelations of a federal investigation into its lending practices. Other builders, such as KB Home(KBH Quote) and Pulte Homes(PHM Quote), closed down 3.4% and 2.9%, respectively.

Ultimately, Bernanke's testimony reiterated that inflation remains the Fed's chief concern but that his outlook for growth has deteriorated slightly in recent weeks. The inflation bias felt a bit obligatory given that so much of the testimony was about the Fed's adjustment to its outlook for economic growth. "Its predominant policy concern remains the risk that inflation will fail to moderate as expected," reads the written testimony.