NEW YORK - Stocks fell Wednesday after Federal Reserve Chairman Ben Bernanke chided investors who may have looked past long-standing concerns about inflation. The Dow Jones industrials fell nearly 100 points, the third straight session of declines.
A rise in oil prices to a six-month high and a weaker-than-expected rise in orders for large manufactured goods compounded investors' concerns Wednesday.
In Capitol Hill testimony, Bernanke said while core inflation slowed modestly in the second half of 2006, recent readings remain "uncomfortably high." He also said troubles among some mortgage lenders that cater to those with poor credit don't appear to have spread to the broader economy, though he added the situation requires further observation.
Stocks rallied last week after investors interpreted language from the Fed as opening the way to the possibility of a reduction in interest rates. But concerns about stubborn inflation could reverse investors' hopes for a reduction in rates, even as the economy continues to cool.
"I think what the Fed is trying to tell us is that it is between a rock and a hard place. And when you're between and a rock and a hard place you just can't move," said Drew Matus, senior economist at Lehman Brothers Holdings Inc.
The Dow industrials fell 96.93, or 0.78 percent, to 12,300.36. The Dow fell by as much as 140 points after the Fed released Bernanke's prepared remarks for his testimony.
Broader stock indicators also pulled back. The Standard & Poor's 500 index fell 11.38, or 0.80 percent, to 1,417.23, and the Nasdaq composite index fell 20.33, or 0.83 percent, to 2,417.10.
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.62 percent from 4.61 percent late Tuesday.
"It wasn't quite a perfect storm but you had enough winds buffeting the market around so it made it hard," Matus said of the combination of Bernanke's testimony as well as the reading on orders for durable goods and political tensions between Iran and the West.
Matus contends Wall Street might have in the last week overestimated the central bank's ability to lower interest rates.
"In reality, there's a lot of uncertainty. You don't move forward unless you can see the path and I don't think they can see the path," he said of the Fed. The central bank has left short-term interest rates unchanged at its last six meetings, interrupting a string of 17 straight increases that began in 2004.
"You can't cut rates to try and spark growth and hope to contain inflation at the same time. That just doesn't work," Matus said.
The dollar was mixed against other major currencies, while gold prices rose.
Beyond concerns about inflation, economic data also weighed on stocks. Orders for durable goods increased 2.5 percent in February amid an increase in sales of commercial aircraft and autos after a 9.3 percent falloff in January. Wall Street had expected the Commerce Department report would show a 3.5 percent gain. The weak reading for January helped contribute to a Feb. 27 global selloff that cut the Dow industrials by 416 points. Excluding the volatile transportation sector, orders fell 0.1 percent, the fourth drop in five months.
Adding to economic concerns, oil prices continued to climb amid political tensions in the Middle East over Iran's detention of British sailors and marines. Oil prices spiked following rumors, which the U.S. military denied, that Iran had fired a missile at a U.S. ship in the Persian Gulf. Also, weekly government inventory data showed a decline in stores of crude oil, gasoline and distillates.
Light, sweet crude rose $1.15 to settle at $64.08 per barrel Wednesday, its highest level since Sept. 11, 2006.
In corporate news, homebuilder Beazer Homes fell $2.64, or 8.4 percent, to $28.77 after coming under investigation for its mortgage lending practices as well as other financial dealings by a host of government agencies. Beazer said it is complying with a request for documents from a federal prosecutor.
Other homebuilders fell alongside Beazer. Hovananian Enterprises Inc. fell $1.09, or 4.1 percent, to $25.55, while KB Home fell $1.43, or 3.2 percent, to $43.88.
Circuit City Stores Inc., rose 35 cents to $19.23 after the electronics retailer announced plans to lay off about 3,400 workers at its stores and replace them with lower-paid employees. The company also plans to eliminate 130 information-technology jobs from its corporate ranks.
Archer Daniels Midland Co. rose 91 cents, or 2.5 percent, to $36.84 after a Citigroup analyst said the food producer, which also makes a type of ethanol derived from corn, should benefit if corn prices fall amid an expected bump in supply.
Vyyo Inc., which makes communications equipment, jumped 97 cents, or 13 percent, to $8.44 after receiving $35 million in funding from Goldman Sachs & Co.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where consolidated volume came to 2.88 billion shares compared with 2.58 billion Tuesday.
The Russell 2000 index of smaller companies fell 4.96, or 0.62 percent, to 797.40.
Overseas, Japan's Nikkei stock average closed down 0.64 percent, while Hong Kong's Hang Seng index fell 0.78 percent. The Shanghai Composite index, after a volatile session in which it had been down sharply, rose 1.09 percent to its eighth straight record close.
Britain's FTSE 100 closed down 0.40 percent, Germany's DAX index fell 0.60 percent, and France's CAC-40 declined 0.62 percent.