Stocks fell Thursday after comments from Federal Reserve (Fed) Chairman Ben Bernanke on the banking sector and weak reports on U.S. economic growth and the jobs market revived concerns about a recession. In a second day of congressional testimony, Bernanke maintained that the U.S. economy can avoid a recession but acknowledged that consumers face more difficulties now than during the last slowdown in 2001. As he did Wednesday, the central bank chief said the Fed is likely to keep cutting interest rates due to the slowing economy, though he noted that the rise in inflation makes it a more challenging environment. Investors have been worried lately that the combination of stagnant growth and rising inflation will leave the economy in a situation of “stagflation,” last seen in the 1970s. Bernanke said the current environment is nowhere near such a condition. In economic news, a revised reading on U.S. gross domestic product (GDP) showed fourth-quarter growth remained at the same weak 0.6 percent rate initially reported. Separately, the number of Americans filing claims for jobless benefits rose unexpectedly last week. Light sweet crude oil for April delivery rose $2.95 to $102.59 a barrel on the New York Mercantile Exchange, a record closing high. The oil future also hit a record trading high of $102.97 a barrel during the session. The financial sector led Thursday's stock downturn after weak earnings from mortgage lender Freddie Mac and comments from Bernanke that while large U.S. banks will likely recover from the recent credit crisis, smaller regional banks could fail. The Dow Jones industrial average fell 112.10, or 0.9 percent, to 12,582.18. Financial stocks AIG, J.P. Morgan, American Express, Citigroup, and Bank of America were lower. The broader Standard & Poor's 500 index fell 12.34, or 0.9 percent, to 1,367.68. The technology-heavy Nasdaq composite index fell 22.21, or 0.9 percent, to 2,331.57. Apple shares jumped after an executive said the company would meet its 2008 target of selling 10 million iPhones. The New York Stock Exchange composite index fell 71.01 to 9,221.88. The American Stock Exchange composite index rose 9.66 to 2,364.32. And the Russell 2000 index fell 10.72 to 705.72.
