Stocks Dip on Bernanke's Sobering Words

y Madlen Read, AP Business Writer Wall Street Retreat After Bernanke Comments Revive Worries About Economy, Earnings

NEW YORK (AP) -- Wall Street extended its retreat Tuesday after Federal Reserve Chairman Ben Bernanke said the night before that the slumping housing market remains a "significant drag" on the economy.Bernanke's comments during a speech at the New York Economic Club revived concerns that a recovery from the summer's credit crisis might take longer than expected -- a sobering thought for investors, who are sifting through mixed third-quarter earnings and watching energy costs rise.

The stock market had its biggest drop in more than five weeks Monday after a consortium of banks led by Citigroup Inc., which reported a steep profit decline that day, announced plans to set up a fund to help bail out the credit markets.

On Tuesday, Wells Fargo & Co. shares fell more than 3 percent after the bank said its third-quarter earnings increased by a bit less than analysts anticipated, and that it boosted loan loss reserves in anticipation of further problems in consumer credit. KeyCorp shares also fell more than 3 percent after the Midwest regional bank posted a 33 percent drop in third-quarter profit.

In early trading, the Dow Jones industrial average fell 47.15, or 0.34 percent, to 13,937.65.

Broader indicators also fell. The Standard & Poor's 500 index slipped 6.96, or 0.45 percent, to 1,541.75, and the Nasdaq composite index dipped 14.29, or 0.51 percent, to 2,765.76.

Treasury bond prices rose, pushing down the yield on the 10-year Treasury note to 4.67 percent from 4.68 percent at Monday's close. Prices and yields move in opposite directions.

Bernanke said in his speech that the deepening housing slump probably will be a drag on economic growth. Still, he again pledged to "act as needed" to help financial markets that were sent reeling this summer.

He did say that inflation remains in check. That could be a key factor for policymakers when deciding whether to cut interest rates at their Oct. 30-31 meeting.

But while core inflation -- which excludes volatile food and energy prices -- is mild, oil prices are pushing further into record territory.

Despite expectations of higher inventories in the weekly U.S. supply report released on Wednesday, a barrel of light, sweet crude rose 51 cents to $86.64 on the New York Mercantile Exchange, on fears Turkey will pursue Kurdish rebels into Iraq and disrupt oil supplies in the region.

Investors will get some more economic data on Tuesday with the National Association of Home Builders/Wells Fargo housing market index for October scheduled to be released at 1 p.m. EDT. The report is expected to show a decline from September.

Overseas, Japan's Nikkei stock average closed down 1.27 percent. Britain's FTSE 100 fell 0.42 percent, Germany's DAX index fell 0.36 percent, and France's CAC-40 fell 0.87 percent.

New York Stock Exchange: http://www.nyse.com