Stocks fall as Bernanke lays out plans for removing emergency economic support measures

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Stocks fall on Bernanke points to end of stimulus

NEW YORK — Investors are disappointed with Federal Reserve Chairman Ben Bernanke’s plans to dismantle the central bank’s economic supports.

The Dow Jones industrial average fell 60 points Wednesday after jumping 150 a day earlier when hopes grew that Greece would get a bailout from its financial troubles.

Bernanke said in prepared remarks to a House committee that the Fed likely will begin tightening credit by raising the interest rate it pays to banks on the money they have deposited at the Fed.

That would lead to an increase in borrowing rates for consumers and businesses. The Fed chief cautioned that the central bank is not yet ready to boost interest rates, which stand at record lows.

Bernanke released his prepared testimony although the committee canceled a planned hearing for Wednesday because of snow.

Craig Kaufman, co-founder and head of capital markets at Kaufman Bros. L.P. in New York, said the Fed’s plan is reasonable and not a shift in policy. He said the market might stumble at first but that investors have known interest rates would eventually move higher as the economy strengthened.

“We’re sort of in this fake world and we need to show that we’re moving back to a normalized process,” Kaufman said, referring to low interest rates that can’t be sustained.

Bernanke’s statement comes as investors await details about a potential rescue package for Greece. Officials said the European Union member nations have made no decisions about how to help the debt-burdened country, but talks are continuing.

EU leaders and Jean-Claude Trichet, the president of the European Central Bank, are scheduled to meet Thursday to discuss the economic health of the 16 nations that use the euro.

Markets have dropped in recent weeks over concerns that debt problems in Greece, Spain and Portugal would spread and upend a global economic recovery. A bailout for Greece raises hopes that European officials will take additional steps to contain debt worries in other countries.

In late morning trading, the Dow Jones industrial average fell 58.42, or 0.6 percent, to 10,000.22. The Standard & Poor’s 500 index fell 7.15, or 0.7 percent, to 1,063.37, while Nasdaq composite index fell 12.09, or 0.6 percent, to 2,138.78.

Bond prices were mixed a day after a slide. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.64 percent from 3.65 percent late Tuesday.

The dollar mostly rose against other major currencies, while gold fell.

European debt problems were the latest in a string of concerns that sent the market retreating over the past four weeks after a steep 10-month advance. China’s plans to curtail economic growth to avoid speculative bubbles and President Barack Obama’s calls to limit trading by large financial institutions dragged stocks lower.

In corporate earnings, The Walt Disney Co. reported fiscal first-quarter profit after the market closed Tuesday that beat analysts’ expectations. The stock fell 47 cents, or 1.6 percent, to $29.37.

The Russell 2000 index of smaller companies fell 4.52, or 0.8 percent, to 590.65.

Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 261.3 million shares compared with 281.8 million shares traded at the same point Tuesday. Analysts predicted that volume would be light because heavy snow along the East Coast would keep some traders out of the market.

In afternoon trading, Britain’s FTSE 100 fell less than 0.1 percent, Germany’s DAX index gained 0.3 percent, and France’s CAC-40 climbed 0.4 percent. Earlier, Japan’s Nikkei stock average rose 0.3 percent.