Dow tumbles on Wall Street woes

NEW YORK (CNNMoney.com) -- The Dow fell over 100 points Wednesday, then recovered a bit, after finishing at record highs just a day earlier on hawkish comments from Federal Reserve chief Ben Bernanke, renewed subprime fears and disappointing tech earnings.

The Dow Jones industrial average (Charts) declined over 100 points earlier but was about 0.6 percent lower 2 1/2 hours into the session.

The broader S&P 500 (down 11.46 to 1,537.91, Charts) eased about 0.7 percent, while the tech-laden Nasdaq (down 27.17 to 2,685.12, Charts) fell about 1.0 percent.

On Tuesday, the Dow Jones industrial average finished in record territory for the fourth straight session, after climbing above the 14,000 mark for the first time ever.

But investors were jittery Wednesday following comments from Federal Reserve Chairman Ben Bernanke and some disappointing earnings from the tech sector.

In prepared testimony to a Congressional committee, the Fed chief said that he sees moderate economic growth this year, but said that the central bank is still wary about inflation.

Bernanke's hawkish stance lowered Wall Street expectations that the Fed will cut interest rates anytime soon.

"The Fed is on inflation alert," said Michael Darda, chief economist, MKM Partners. "The fear is that the chance of a hike is certainly more probable than a [rate] cut."

Renewed concerns about the extent of the fallout from problems in the subprime mortgage sector also pressured investor sentiment. Two Bear Stearns (down $2.07 to $137.84, Charts, Fortune 500) hedge funds heavily invested in securities backed by subprime mortgages are nearly worthless, according to a report in the Wall Street Journal.

Tech leaders Yahoo and Intel delivered some disappointing earnings news late Tuesday, as Yahoo lowered its 2007 sales outlook after posting in-line quarterly results late Tuesday.

Intel's gross margin - a key measure of profitability - disappointed investors, despite reporting earnings that met Wall Street estimates.

Yahoo (down $1.29 to $26.24, Charts, Fortune 500) shares fell over 3 percent, while Intel (down $1.26 to $25.07, Charts, Fortune 500) stock declined nearly 5 percent on the Nasdaq.

On the economic front, prices paid by consumers rose slightly more than expected in June, but so-called core CPI, which strips out food and energy prices, fell in line with Wall Street expectations.

Housing starts climbed in June, but applications for new projects, a key measure of builder confidence, fell more than expected, the Census Bureau reported Wednesday.

On the earnings front, JPMorgan Chase reported a better-than-expected increase in quarterly results before the bell Wednesday, driven by strong investment banking results. JP Morgan (down $1.70 to $48.23, Charts, Fortune 500) shares were over 3 percent lower on the New York Stock Exchange.

Drugmaker Pfizer (down $1.05 to $24.91, Charts, Fortune 500), meanwhile, posted a decline in quarterly profit, hurt by generic competition, sending its shares over 4 percent in late morning trade.

Macy's (up $4.17 to $44.20, Charts) shares soared over 10 percent following a report by Women's Wear Daily that private equity firm KKR is reportedly mulling a $24 billion bid for the retailer in conjunction with Goldman Sachs.

In the airline sector, Delta Air Lines Inc. (up $0.15 to $21.34, Charts, Fortune 500), Southwest Airlines Co. (up $0.05 to $15.64, Charts, Fortune 500) both reported better-than-expected earnings Wednesday, on strong demand and higher ticket prices.

The earnings deluge will continue Wednesday, with Dow component IBM (up $0.69 to $111.46, Charts, Fortune 500) among the companies set to report results after the market close.

In corporate news, the board of Dow Jones (down $0.58 to $55.87, Charts) backed the $5 billion takeover offer from Rupert Murdoch's News Corp (down $0.03 to $24.22, Charts, Fortune 500). Approval from the controlling Bancroft family is still needed for the deal to go ahead.

Oil prices jumped after the weekly inventory report revealed a bigger-than-expected drop in crude and gasoline inventories. U.S. light crude for August delivery added $1 to $75 a barrel on the New York Mercantile Exchange.

Treasury prices climbed, lowering the yield on the benchmark 10-year note to 5.01 percent from 5.07 percent late Tuesday. Bond prices and yields move in opposite directions.

The dollar fell against the euro and the yen.

COMEX gold for August gained $6.90 to $672.80.

Market breadth was negative. Losers beat winners more than 2 to 1 on the New York Stock Exchange on volume of 604 million shares. Decliners topped advancers nearly 3 to 1 on the Nasdaq on volume of 836 million shares.

In global trade, European stocks fell sharply, and Asian markets finished the session lower.