Stocks inched lower in a choppy session on Wednesday after comments from U.S. Federal Reserve Chairman Ben Bernanke were viewed as a subtle shift in the central bank's highly accommodative monetary policy.
Indexes appeared poised to advance for the fifth straight session on stronger-than-expected economic data before quickly reversing course as Bernanke began his testimony to the U.S. House of Representatives Financial Services Committee.
The Fed chairman's comments acknowledging improvements in the labor market were seen as a step away from recent fiscal policy, although Bernanke said the economy would need to strengthen for the jobless rate to keep dropping.
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.
The comments pushed the dollar <.DXY> up 0.4 percent against a basket of major currencies and sent materials lower. Gold fell more than 3 percent and the PHLX Gold/Silver index <.XAU> lost nearly 3 percent.
The S&P Materials Index <.GSPM> was the worst performing of the 10 S&P sectors, down 1.1 percent, with Newmont Mining Corp
Traders also booked some profits after the three major U.S. stock indexes hit multi-year highs on stronger-than-expected economic data.
The Nasdaq topped 3,000 for the first time since mid-December 2000 before retreating. The Dow industrials and the S&P 500 initially added to the previous day's gains that catapulted them to four-year highs.
Analysts warned the year's rally has come on light volume, and hitting new highs could spark selling on technical triggers.
You've had various technical sell signals going off throughout February and the market has hung in. So today is a pivotal day - when you've had a year like this where we haven't really had any significant selloff - every day becomes pivotal,
The Dow Jones industrial average <.DJI> dropped 8.93 points, or 0.07 percent, to 12,996.19.. The Standard & Poor's 500 Index <.SPX> shed 1.29 points, or 0.09 percent, to 1,370.89. The Nasdaq Composite Index <.IXIC> dipped 2.93 points, or 0.09 percent, to 2,983.93.
In February, daily volume on the New York Stock Exchange, NYSE Amex and Nasdaq has averaged 6.87 billion shares. Last year, the average daily volume in February was 7.81 billion.
Energy stocks also lost ground after data showed a build-up in crude inventories and U.S. light crude oil futures fell for a third consecutive session. The PHLX Oil Service Sector Index <.OSX> dropped 0.9 percent.
Lufkin Industries Inc
Economic data earlier showed the U.S. economy grew slightly faster than initially thought in the fourth quarter while the pace of business activity in the U.S. Midwest picked up in February to its highest level in 10 months.
With improvement in new orders and employment gauges, the Purchasing Managers Index advanced the perception of a continuing recovery in key U.S. economic sectors. The optimism has fueled a gain of more than 9 percent for the S&P 500 this year.
(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)