Rally Snapped On Subprime Jitters

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Stocks retreated Wednesday as investors reacted uneasily to Federal Reserve Chairman Ben Bernanke’s comments on the economy and news that two Bear Stearns Cos. hedge funds were essentially worthless. The Dow Jones industrials fell more than 100 points.

Even without any bad news, a downturn in stocks was expected after the rally that began last week and that Tuesday nudged the Dow past the 14,000 mark for the first time. With no major catalyst behind the advance, the record run has perhaps been puzzling to market watchers trying to determine if it has room to build or has run its course.

Investors sold off shares as Bernanke, speaking before the House Financial Services panel as part of the central bank’s midyear forecast, said the economy should strengthen into 2008 and inflation risks remain the Fed’s “predominant” concern. He also said the housing sector might get worse before it gets better – and remains a risk to consumer spending and overall economic growth. (Click HERE for the complete story)