NEW YORK " Investors ended an early rally and began selling on Wall Street Tuesday as Federal Reserve Chairman Ben Bernanke told Congress an economic recovery depends on the government's ability to stabilize weak financial markets.
Bernanke's comments came as the central bank announced it would begin lending up to $200 billion initially to spur consumer and small business borrowing for autos, education, credit cards and other expenses. The Fed first announced the plan late last year and investors have been eager for details on how it would work.
The effectiveness of a series of moves by the Fed, the Treasury Department and other agencies to calm markets "will be critical determinants of the timing and strength of the recovery," Bernanke told the Senate Budget Committee.
With investors focused on Bernanke, they had little reaction to a weaker-than-expected report from the National Association of Realtors that pending U.S. home sales sank to a record low in January. The trade group said its seasonally adjusted index of pending sales for previously owned homes fell 7.7 percent to 80.4. Economists expected a reading of 85.1, according to Thomson Reuters.
Wall Street remained on edge a day after the Dow Jones industrial average plunged far below the 7,000 mark to end at 6,763 " the lowest close for the Dow since April 25, 1997. The Dow's 300-point drop Monday leaves the index more than 52 percent below its record high of 14,164.53 set in October 2007.
In late morning trading Tuesday, the Dow fell 35.20, or 0.5 percent, to 6,728.09.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 5.74, or 0.8 percent, to 695.08. The index briefly traded below the psychological benchmark of 700 Monday before closing at that level; it last closed below 700 on Oct. 28, 1996, when it finished at 697.26.
The Nasdaq composite index fell 3.95, or 0.3 percent, to 1,318.90.