Stocks fell on Wednesday as weak commodity prices sparked a selloff in the energy and materials sectors and as a falling euro and high Italian bond yields kept Europe's debt crisis in focus.

Eight of 10 S&P 500 sectors were down, led by energy <.GSPE>. The S&P 500 <.SPX> fell below its 50-day moving average, which could be a portent of more losses.

Italy's borrowing costs rose to a euro-era record high after an auction of five-year debt, while the euro fell to an 11-month low against the dollar.

U.S. stocks have been weighed down this week on fears that the agreement carved out at last week's keenly awaited European Union summit did not go far enough to resolve the two-year-old debt crisis.

The U.S. economy continues to show subtle improvements, and that volatility is being caused by the news coming out of Europe, said Bryant Evans, investment adviser and portfolio manager at Cozad Asset Management in Champaign, Illinois.

Europe is not going to solve its problem in the next month, so in the short run the markets are probably going to remain fairly weak.

The Dow Jones industrial average <.DJI> was down 69.10 points, or 0.58 percent, at 11,885.84. The Standard & Poor's 500 Index <.SPX> was down 6.36 points, or 0.52 percent, at 1,219.37. The Nasdaq Composite Index <.IXIC> was down 28.60 points, or 1.11 percent, at 2,550.67.

The S&P energy sector <.GSPE> fell 1.8 percent as U.S. crude oil prices slid more than 4 percent to hover near $96 a barrel.

Gold dropped to its lowest level since early October as the weak euro and a shortage of dollar funding near the year-end prompted investors to sell aggressively. Commodity-related shares were further pressured by the strengthening U.S. dollar.

Investors were also disappointed the U.S. Federal Reserve made no mention of possible new stimulus measures after its Tuesday meeting.

Though a majority of economists polled by Reuters expected no more Fed action to boost the economy in the short term, another survey showed most primary dealers saw the central bank enacting some type of stimulus.

Shares of First Solar Inc , a maker of solar power systems, tumbled 19.3 percent to $34.36 after it cut its 2011 sales and profit forecast for the second time in two months and said profits year would miss Wall Street's view. First Solar joins a list of companies, including Intel Corp Dupont and Co and Texas Instruments Inc , that have cut their outlooks.

An index of home builder stocks <.DJUSHB> dropped 2.4 percent after the National Association of Realtors said data on sales of previously owned homes will be revised downward because of double counting.

(Reporting by Angela Moon; additional reporting by Ryan Vlastelica; Editing by Leslie Adler)