An early rally in stocks faded in the afternoon Thursday after Bernanke signaled no immediate further steps from the Fed to stoke economic growth in the United States, which has shown signs of faltering.
A report that Americans cut back sharply on their credit card purchases in April, suggesting consumers were losing confidence in the economy, also took some steam out of the market.
Bank stocks also lost ground late in the day after the Fed said it wants U.S. banks to set aside more money to cushion against unexpected losses, a key step in preventing another financial crisis.
The Dow Jones industrial average had been up as much as 140 points but closed up 46.17 points, or 0.3 percent, at 12,460.96.
“The market is addicted to easy money, and Bernanke has the job of not pulling the trigger unless the situation needs stabilizing,” said Doug Roberts, chief investment strategist at the investment company Channel Capital Research.
The Fed chairman said the central bank was “prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.”
On Thursday, the early rally in stocks came after China cut its benchmark lending rate for the first time in nearly four years, adding to efforts to reverse a sharp slowdown in economic growth there.
“China is the world’s economic locomotive at the moment, and it can’t afford to slow down at a time when other major economies are in precarious positions,” said Matthew Kaufler, portfolio manager at mutual fund group Federated Investors.
The broader stock market drifted lower during the afternoon as well. The Standard & Poor’s 500 index ended down 0.14 point at 1,314.99. The Nasdaq composite index finished down 13.70 points at 2,831.02.
Industrial stocks that rely heavily on the Chinese market for sales were among the biggest gainers on the New York Stock Exchange. Heavy equipment maker Caterpillar rose 48 cents to $87.14.
The price of gold, which since 2009 has often surged as the Fed has bought bonds to stimulate the economy, fell almost 3 percent after Bernanke’s testimony. Gold declined $46 an ounce, the biggest decline since April, to $1,588.
Gold tends to fall when traders expect the value of the dollar to rise, which is a likely outcome if the Fed doesn’t take steps to keep interest rates low, like buying government bonds.