NEW YORK ( TheStreet) -- The major U.S. stock indices finished the last day of the month in the red Wednesday after a more hawkish testimony from Federal Reserve chairman Ben Bernanke sapped earlier market momentum.
The Dow Jones Industrial Average fell 53 points, or 0.4%, to close at 12,952. The S&P 500 lost 6.5 points, or 0.5%, at 1365. The Nasdaq lost 19.9 points, or 0.7%, at 2967 after crossing 3000 for the first time for the first time in more than 11 years.
Equities pulled back after Bernanke suggested that improvements in the U.S. economy may lessen the need for further monetary stimulus. In his semi-annual speech before Congress, the Bernanke characterized the pace of economic growth as "uneven and modest by historical standards." However, he acknowledged some improvement in the labor market and said that headwinds like Europe and a weak housing market would fade beyond 2012.
"Bernanke said that the Fed is maintaining its very accommodative monetary policy because it views the unemployment rate as too high, the near-term inflation outlook as too low, and is concerned about downside risks to growth," said economists at PNC. "However, given the recent run of good news, the Federal Open Market Committee will not undertake a third round of quantitative easing when it meets in mid-March. Additional quantitative easing is likely this spring only if economic conditions deteriorate over the next few months, which we do not expect to occur."The Fed's Beige Book report on economic conditions this afternoon indicated that there has been some improvement in the housing sector in most of its 12 regional districts; hiring had increase slightly across several districts; and that many of the districts reported improving manufacturing activity, noting a rise in in new orders, shipments and production. Some even reported improved investment spending. Meanwhile, gold and silver prices fell sharply as Bernanke suggested that rising gas prices could temporarily push up inflation. April gold futures fell $77.10 to $1,711.30 an ounce. In other commodities, April oil futures added 52 cents to $107.07a barrel. The dollar index turned higher by 0.7%. The benchmark 10-year Treasury was down 8/32, pushing the yield to 1.974. The Nasdaq retreated after briefly breaking above 3000, a level it hasn't topped since the year 2000. The morning's rally was spurred by upbeat economic news. The Chicago purchasing managers index ticked in at a reading of 64 in February, beating the forecast for 61.5 from Thomson Reuters. The index rose to its highest level in ten months, suggesting that regional business has been picking up. The U.S. government said that the economy grew at a pace of 3% in the fourth quarter, upwardly revised from its first estimate of 2.8%. Economists had thought the growth reading would stay unchanged, according to Thomson Reuters. The European Central Bank said it lent a total of €530 billion to 800 financial institutions in Europe as part of its second round of long-term refinancing. Economists had expected the banks to soak up a sum in the €500 billion ballpark. Despite this, European stocks followed the U.S. market lower. Germany's DAX closed down 0.46% while London's FTSE settled down 0.95%. Japan's Nikkei Average settled up 0.01% and Hong Kong's Hang Seng was up 0.52%.
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