After beginning the day with a partial rebound from Monday’s steep drop, stocks on Wall Street gave up their gains Tuesday in the course of Congressional testimony by Ben S. Bernanke, the Federal Reserve chairman.
In late morning trading, the Standard & Poor’s 500-stock index was essentially flat, while the Dow Jones industrial average was up 0.4 percent. The Nasdaq composite index was down 0.1 percent.
In his prepared testimony before the Senate Banking Committee, Mr. Bernanke defended the Fed’s bond-buying program and said the economy was growing at a “moderate if somewhat uneven pace.” Senators were questioning him on the prospects for a global currency war and the potential economic effects of the latest budget impasse in Congress.
The major indexes fell more than 1 percent on Monday, with the S.&P. 500 recording its biggest daily drop since November. The falloff came as investors fretted that if Italy does not undertake reforms, the euro zone could once again be destabilized. The Euro Stoxx 50 index was off more than 3 percent in late trading Tuesday.
Groups in Italy opposed to economic reforms posted a strong showing in the recent election, resulting in a political deadlock with a comedian’s protest party leading the poll and no group securing a clear majority in Parliament.
“We’ve gone to an environment of political stability to instability, and until we get some type of clarity over who is in charge, which could take days, the market will have renewed concerns,” said Art Hogan, managing director of Lazard Capital Markets in New York.
Still, market participants speculated that a coalition government would eventually emerge in Italy and ease worries about a new euro zone crisis.
The early market gains suggested the recent trend of investors buying on dips would continue. Last week, concerns that the Federal Reserve might roll back its stimulus efforts earlier than expected prompted a sharp two-day decline, though equities recovered most of the lost ground by the end of the week.
“Investors are taking advantage of the drop, and once some kind of coalition government is formed, most of our concerns will be put to rest,” Mr. Hogan said.
Home Depot reported adjusted earnings and sales that beat expectations, sending shares up more than 5 percent.
Macy’s rose 2.6 percent after stating it expected full-year earnings to be above analysts’ forecasts because of strong sales in the holiday period.
For the benchmark S.&P. 500, 1,500 points will be watched as a key benchmark after the index closed below it on Monday for the first time since Feb. 4, with selling accelerating after falling below it. An inability to break back above it could portend further losses.
Financial shares may be among the most volatile, as that sector is closely tied to the pace of global economic growth. Morgan Stanley was one of the top percentage losers on the S.&P. on Monday, dropping more than 6 percent on concerns about the company’s exposure to European debt. It initially rose 0.8 percent on Tuesday, but was down 0.5 percent by late morning.
This article has been revised to reflect the following correction:
Correction: February 26, 2013
Because of an editing error, an earlier version of this article misidentified the Senate panel before which Ben S. Bernanke, the Federal Reserve chairman, was testifying Tuesday. It was the Banking Committee, not the Finance Committee.
Wall Street Sheds Morning Gains
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