NEW YORK ( TheStreet) -- In a now all-too familiar pattern, stocks lost momentum and reversed at the end of Wednesday's session, finishing in negative territory on a dwindling euro and a beat-up energy sector.

The move lower came even after Federal Reserve comments highlighting modest economic improvements and Fed Chairman Ben Bernanke's reassurance to Capitol Hill lawmakers that the U.S. recovery was still on track, each of which helped prop up earlier gains.

The Dow Jones Industrial Average had gone above 10,000 earlier in the session, but finished 41 points lower, or 0.4%, at 9,899. The S&P 500 gave up 6 points, or 0.6%, at 1056, while the Nasdaq slipped 12 points, or 0.5%, at 2159.

When stocks neared their session highs earlier in the session, Mike Shea, managing partner at Direct Access Partners, counted on further volatility to come.

"We'll continue to see volatility until we have a stable currency situation with the euro and until we see the Libor come back down a little bit -- then you'll see the market stop playing defense. Right now the market is still in defense mode. I think there's a lot of trading going on, but I'm not sure that there's a lot of investing," Shea said.

Overseas on Wednesday, Hong Kong's Hang Seng rose 0.7%, and Japan's Nikkei fell 1%. The FTSE in London gained 1.2% and the DAX in Frankfurt soared 2% higher.

The Economy

"The economy -- supported by stimulative monetary policy and the concerted efforts of policymakers to stabilize the financial system -- appears to be on track to continue to expand through this year and next," Bernanke said in comments prepared for his testimony on economic conditions and the federal budget before the House Budget Committee.

According to the pre-released statement , the latest projections of Fed governors and reserve bank presidents are for real domestic product growth of 3.5% for 2010 and a slightly faster pace in 2011.

"Although the support to economic growth from fiscal policy is likely to diminish in the coming year, the incoming data suggest that gains in private final demand will sustain the recovery in economic activity," Bernanke said.
Federal Reserve Chairman Ben Bernanke

The Department of Commerce said April wholesale inventories rose 0.4% after growing 0.7% in March. Economists had been expecting slightly stronger growth of 0.5%, but the previous month's level was upwardly revised from a previously reported increase of 0.4%.

The Energy Information Administration said crude oil inventories shed 1.8 million barrels in the week ended June 4, exceeded the drop of 1.3 million barrels projected by analysts in a Platts survey. The level wasn't as bullish as the decline of 4.54 million barrels that the American Petroleum Institute reported late Tuesday.

The EIA also said gasoline inventories remained unchanged and distillates gained 1.8 million barrels week-over-week. Analysts polled by Platts had expected gasoline supplies to gain 430,000 barrels, and distillates were projected to increase by 550,000 barrels.

Earlier, Mortgage loan application volume fell by a seasonally adjusted 12.2% last week, or 21.1% when unadjusted for the Memorial Day holiday, according to the Mortgage Bankers Association's market composite index. Refinancing applications fell 14.3% week-over-week, and purchasing applications slipped 5.7%.

The Federal Open Market Committee released an anecdotal report on economic conditions across the Federal Reserve's 12 districts in the afternoon, also known as the beige book. The group said modest improvements were seen across all districts since the previous report, helped by a pickup in consumer spending, tourism and business spending, among other items. Lending in a few districts also showed marginal improvements, though commercial real estate remains sluggish. The report also said permanent employment has picked up a bit in most areas.

Company News

Caterpillar ( CAT) was one of the Dow's best performers after the company said it will raise its quarterly cash dividend to 44 cents a share from 42 cents.

Shares of Boeing ( BA), Kraft Foods ( KFT), Wal-Mart ( WMT) and Alcoa ( AA) were other leaders on the Dow. But Bank of America ( BAC), Exxon Mobil ( XOM) and JPMorgan Chase ( UTX) were its biggest laggards, leading the average lower.

Johnson & Johnson ( JNJ), another firm that showed weakness on the blue-chip average, was recently forced to recall some children's pain and cold medicines because of manufacturing practices that may have put metal particles in the products. The FDA is now considering criminal penalties against the company after further investigations uncovered more active ingredients than had been approved and bacteria in some raw materials.

Texas Instruments ( TXN) saw shares dwindle 0.6% lower even though the company lifted the lower end of second-quarter guidance to an expected sales range of $3.45 billion to $3.59 billion from between $3.31 billion and $3.59 billion, previously. Earnings, meanwhile, are projected to come in between 60 cents and 64 cents a share, up from prior guidance for a profit between 56 cents and 64 cents a share.

Shares of Ciena ( CIEN) rose 0.8% after the company narrowed its second-quarter loss, beating analysts' expectations but reported sales of $253.5 million, which fell short of estimates for $268.3 million.

Navistar ( NAV) affirmed its full-year guidance for earnings in the range of $2.75 to $3.25 a share after reporting higher net earnings. The company also said orders it has received so far suggest that it will be well-positioned for the rest of the year.

Health care software company Allscripts ( MDRX) agreed to acquire rival Eclipsys ( ECLP) for $1.3 billion in stock.

Banco Santander ( STD) reached an agreement to buy the 24.9% stake in Santander Mexico it doesn't already own from Bank of America ( BAC) for $2.5 billion.

Shares of General Maritime ( GMR) rebounded from a morning slump, adding 8.1% after news that the provider of international seaborne crude oil transportation services agreed to buy seven supertankers for $620 million.

Continuing fears sent BP ( BP) tumbling to a new 52-week low, down 15.8% by the end of the day.

Commodities and the Dollar

Following the EIA report, crude oil for July delivery added $2.39, to settle at $74.38 a barrel.

Elsewhere in commodity markets, the August gold contract settled $15.70 lower, at $1,229.90 an ounce.

The dollar was trading lower against a basket of currencies, with the dollar index down by 0.6%.


In its latest sale, the government auctioned off some $21 billion in 10-year notes, according to MarketWatch, which resulted in a yield at 3.242% and a bid-to-cover ratio of 3.24.

The benchmark 10-year Treasury was gaining 1/32, diluting the yield to 3.188%.

The two-year note was adding 1/32, with the yield down at 0.734%. The 30-year bond was weakening 4/32, boosting the yield to 4.121%.

--Written by Melinda Peer and Sung Moss in New York.

If you liked this article you might like

U.S. Stocks Edge Higher But Facebook Pressure Holds Tech Sector in Check

U.S. Stocks Edge Higher But Facebook Pressure Holds Tech Sector in Check

Global Stocks Steady After Tech Wipe-Out but U.S. Futures Weaken Ahead of Fed

Global Stocks Steady After Tech Wipe-Out but U.S. Futures Weaken Ahead of Fed

As Gary Cohn Stock Selloff Gets Nasty, Investors Send All Sorts of Assets Lower

As Gary Cohn Stock Selloff Gets Nasty, Investors Send All Sorts of Assets Lower

How to Invest in Oil

How to Invest in Oil

Video: 5 of the Biggest Losers From the New Tax Code

Video: 5 of the Biggest Losers From the New Tax Code