Lackluster Finish for U.S. Stocks

Updated from 4:20 p.m. EDT

New York's major indices went out mixed Tuesday as hawkish words from the Federal Reserve chief left stocks unable to sustain any sincere forays into positive territory, notwithstanding a leaping dollar and an encouraging development in the blistering oil market.

Stocks had an erratic session, with the Dow Jones Industrial Average roaming in and out of the green throughout the day before closing up 9.44 points, or 0.1%, to 12,289.76.

The index enjoyed particularly strong support from Coca-Cola (KO Quote), which was upped to buy from hold at Deutsche Bank, and financial components Citigroup (C Quote), JPMorgan Chase (JPM Quote) and AIG (AIG Quote).

Broader indices, meanwhile, returned to negative territory following a bit of short-lived strength earlier, though both closed off their lows for the day. The S&P 500 surrendered 3.32 points, or 0.2%, to 1358.44, and the Nasdaq Composite lost 10.52 points, or 0.4%, to 2448.94.

"The market is undergoing a state of real nervousness here," said Peter Cardillo, chief market economist with Avalon Partners. "The fact that [Fed chairman] Ben Bernanke and other Fed members are continually talking about the risks of higher inflation and hinting that the Fed is going to have to raise interest rates to combat inflation, I think, is really weighing heavily on stocks."

As the new day began, traders were dealing with a speech from leader of the central bank, who said the jump in oil costs "has added to the upside risks for inflation and inflation expectations," even as his expectations for a "substantial downturn" have simultaneously diminished. He added that the Fed "will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation."