U.S. stocks reversed early gains on Wednesday, prompting questions on whether the market's slow and steady rally of the past few months was about to end amid an unexpected selloff in the euro.

The market's reversal came after bearish remarks on the U.S. economy, in particular the country's job market, by Federal Reserve Chairman Ben Bernanke, which some traders said may have accelerated the declines.

Stocks fell as traders cashed in on indexes that hit multi-year highs in early trade, after data showing the U.S. economy grew slightly faster than initially thought in the fourth quarter. The pace of business activity in the U.S. Midwest also picked up in February, to its highest level in 10 months.

The Nasdaq topped 3,000 for the first time since mid-December 2000 before retreating. The Dow industrials and the S&P 500 had also added to the previous day's gains that catapulted them to 4-year highs.

Bernanke said the economy would have to strengthen to ensure that the unacceptably high jobless rate keeps dropping -- indicating the Fed was open to buying more bonds to help, without implicitly saying so.

Was he dovish? Absolutely, he has to be. Otherwise, he risks undoing all the policy initiatives he has crafted to press long-term (interest) rates lower, said Eric Green, an analyst with TD Securities in New York.

In forex markets, traders read Bernanke's testimony as suggesting the Fed was unlikely to engage in more monetary easing for now -- meaning a firmer dollar in the near term. That pushed the euro down 0.8 percent to $1.3361 after having marked a session low of $1.3343.

By noon, the Dow Jones industrial average was down 36.55 points, or 0.28 percent, at 12,968.57. The Standard & Poor's 500 Index was down 3.26 points, or 0.24 percent, at 1,368.92. The Nasdaq Composite Index was down 5.56 points, or 0.19 percent, at 2,981.20.

Some repeated their prognosis that the run-up in stocks had come on light volume, and consistent new highs on the market would automatically set off technical selling triggers.

There are a lot of people that put in technical sell orders, so that is a possibility, said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois.

Daily volume on the New York Stock Exchange, NYSE Amex and Nasdaq averaged 6.87 billion shares in February. The average in February 2011 was 7.81 billion.

Energy stocks were among the biggest weights on the S&P 500 after data showing a build-up in U.S. crude oil stockpiles. The S&P energy sector index was down 0.6 percent.

U.S. crude prices fell for a third straight day, with the front month contract on the New York Mercantile Exchange down about half a percent at $105.93 a barrel. London's Brent crude, however, rebounded from an earlier drop to trade up 0.2 percent at $121.79.

Bond prices fell as demand for safe-haven debt dipped after the closely watched index on Midwest business activity -- issued by the Institute for Supply Management-Chicago -- came in stronger than expected, indicating an economy on the mend.

U.S. Treasuries' benchmark 10-year note was down 16/32, with the yield at 1.9947 percent.

(Editing by Theodore d'Afflisio, Leslie Adler and Andrea Evans)