U.S. stocks fell on Wednesday for first time in five sessions and gold suffered its biggest one-day drop in more than three years after Federal Reserve Chairman Ben Bernanke disappointed investors who had hoped for a strong signal of more stimulus.
The major U.S. stock indexes still posted solid gains for the month, and the Nasdaq briefly topped 3,000 on Wednesday for the first time since December 2000.
Bernanke, in testimony to Congress, gave a tempered view of the U.S. economy, pouring cold water on the notion that recent upbeat signs herald a stronger recovery. But he gave no hint of new asset purchases, which the Fed has used in recent years to boost growth.
His comments drove selling in Treasuries as well as equities, though losses in stocks were curbed by reports suggesting improvement in the economy.
The government reported the U.S. economy grew 3.0 percent in the fourth quarter, revised up from its prior estimate of 2.8 percent. The Fed in its Beige Book, an anecdotal report on regional activity, said the U.S. economy expanded modestly in January through mid-February.
But the disappointment over Bernanke's failure to hint at more stimulus and the end of the European Central Bank's second round of cheap bank loans drove sentiment.
People just viewed him as slightly more hawkish than he has been previously - I would emphasize the word 'slightly,' said Michael Marrale, managing director and head of sales trading at RBC Capital Markets in New York.
On Wall Street, the modest scope of the day's decline indicated investors were inclined to take some profits after a five-month rally that has driven the S&P 500 up 8.6 percent since the end of December.
For the month, the Dow gained 2.5 percent, the S&P 500 rose 4.1 percent and the Nasdaq climbed 5.4 percent.
With the sprint we've made the last two months that has caught many by surprise, I think it'll be a welcome relief for some investors at least if the market undergoes some technical selling or at least pause from here, said Gary Flam, portfolio manager at Los Angeles' Bel Air Investments, which has about $6.5 billion under management.
At the close, the Dow Jones industrial average was down 53.05 points, or 0.41 percent, at 12,952.07. The Standard & Poor's 500 Index was down 6.50 points, or 0.47 percent, at 1,365.68. The Nasdaq Composite Index was down 19.87 points, or 0.67 percent, at 2,966.89.
Global stocks, measured by the MSCI ACWI ended down 0.2 percent on the day but up 4.7 percent on the month.
European stocks ended the session flat and the month up 4 percent.
Gold fell 5 percent to below $1,690 an ounce. For the month, the precious metal ended down 2.5 percent, its second decline in three months.
It's just a pullback, it doesn't feel like it would be the start of a bear market, said Jeffrey Sherman, commodities portfolio manager of DoubleLine Capital, a Los Angeles-based investment manager with $28 billion in assets.
Oil prices ended up after a day of choppy trade. Brent crude in London settled at above $122 a barrel, up 1 percent on the day. February marked the best month in a year, with a 10.5 percent gain after a rally fueled by supply-related tensions in the Middle East.
The dollar gained against the euro and yen. The euro fell as low as $1.3313 and last traded down 1.1 percent at $1.3318. Against the yen, the dollar hit a high of 81.31 before receding to 81.18, still up 0.9 percent for the day.
Bonds fell on Bernanke's remarks and as the ECB offered 530 billion euros in cheap three-year funds in a second round of funding that the bank hopes will be its last major crisis-fighting act.
The benchmark 10-year U.S. Treasury note was down 9/32, with the yield at 1.9722 percent.
Bernanke basically didn't address the situation (of further stimulus) at all, and that combined with the end of the ECB measures, caused markets to behave as if we were looking at the end of additional liquidity measures, said John Briggs, Treasury strategist at RBS Securities in Stamford, Connecticut.
Markets are trading as though they are recognizing a temporary lull in the printing press.
(Editing by Leslie Adler)