The Federal Reserve's latest take on the U.S. economy put many investors into sell mode Tuesday, sending stocks mostly lower after a brief upward turn early in the day.
Stocks finished the day mixed, with the Dow Jones industrial average eking out a tiny gain.
The Dow added 5.26 points, or 0.03 percent, to 17,060.68. The index is down slightly from its July 3 record of 17,068.65.
The Standard & Poor's 500 index fell 3.82 points, or 0.2 percent, to 1,973.28. The index is down 0.6 percent from its most recent high of 1,985.44, set July 3.
The Nasdaq composite shed 24.03 points, or 0.5 percent, to 4,416.39.
The three stock indexes are all up for the year.
Fed Chairman Janet Yellen, speaking before Congress, said the U.S. economy has yet to recover fully but suggested the central bank could raise its key short-term interest rate if the economy strengthens.
The Fed also issued a report noting that valuations for stocks in some sectors, such as social media and biotechnology firms, appear to be stretched, sending shares in Facebook, Twitter and LinkedIn lower.
By suggesting some stocks could be overvalued, the Fed is adding to a growing belief among some market watchers that stocks are due for a pullback, said Drew Wilson, an equity analyst at Fenimore Asset Management.
"In this type of environment when you have a lot of uncertainty, essentially you have this equilibrium that's looking to be broken one way or another, and the Fed chair saying 'financial bubble' could do that," Wilson said.
Investors had plenty more to consider, including a mostly encouraging batch of corporate earnings and economic data.
The major U.S. financial market indexes were up slightly in premarket trading as JPMorgan, Goldman Sachs and Johnson & Johnson released quarterly results that exceeded Wall Street's expectations.
Separate reports on U.S. retail sales and manufacturing growth also gave the market an early lift.
But stock indexes diverged shortly after the market opened and then fully veered into the red about an hour into regular trading as investors began to tune into Yellen delivering the central bank's semiannual economic report to Congress.
Beyond the Fed, investors are mostly focused on company earnings this week, including quarterly reports today from Bank of America, eBay and Yum Brands.
Bank earnings on Tuesday set a good tone for the latest earnings season.
JPMorgan, the nation's largest bank by assets, said its second-quarter earnings fell 9 percent as revenue at its investment banking and mortgage businesses dropped. The stock gained $1.98, or 3.5 percent, to $58.27. Goldman's profit rose 5 percent, helped by record results from investment banking. Goldman gained $2.17, or 1.3 percent, to $169.17.
Shares in rent-to-own retailer Aaron's tumbled 9.5 percent after the company cut its profit and revenue outlook for the second quarter, partly citing performance of its core business. The stock shed $3.19 to $30.34.
Bond prices barely budged. The yield on the 10-year Treasury note held steady at 2.55 percent.
Business on 07/16/2014